free trade

Question by sultanar29 Reward: 100 Pond Points + 10 Knowledge Tokens Status: Pending a resolution
what is free trade?



Reply from leakywelly User Rating:  2550 Knowledge Tokens
Not to be confused with Free market.
World trade
A series on Trade
Storck Harbour scene.jpg
Policy[show]
Import Export Balance of trade
Comparative advantage
Trade law Trade pact Trade bloc
Trade creation Trade diversion
Export orientation Import substitution
Trade finance Trade facilitation
Trade route Domestic trade
Tax, tariff and trade
Restriction[show]
Trade barriers
Tariffs Non-tariff barriers
Import quotas Tariff-rate quotas
Quota share Import licenses
Customs duties Export subsidies
Technical barriers Bribery
Exchange rate controls Embargo
Safeguards
Countervailing duties
Anti-dumping duties
Voluntary export restraints
History[show]
Mercantilism Protectionism
Laissez-faire Free trade
Economic nationalism
Economic integration
Organizations[show]
World Trade Organization
World Customs Organization
International Monetary Fund
Preferential trading area
Free trade area Customs union
Single market Economic union
Monetary union Fiscal union
Customs and monetary union
Economic and monetary union
Issues[show]
Intellectual property rights
Smuggling Competition policy
Government procurement
Outsourcing Globalization
Fair trade Trade justice
Emissions trading Trade sanctions
War (Currency Customs Trade)
Trade and development
Lists[show]
Imports Exports Tariffs
Largest consumer markets
Leading trade partners
By Country[show]
Trade mission Trading nation
United States Argentina Romania
Vietnam
v d e

Free trade is a system of trade policy that allows traders to trade across national boundaries without interference from the respective governments. According to the law of comparative advantage the policy permits trading partners mutual gains from trade of goods and services.

Under a free trade policy, prices are a reflection of true supply and demand, and are the sole determinant of resource allocation. Free trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by artificial prices that may or may not reflect the true nature of supply and demand. These artificial prices are the result of protectionist trade policies, whereby governments intervene in the market through price adjustments and supply restrictions. Such government interventions can increase as well as decrease the cost of goods and services to both consumers and producers.

Interventions include subsidies, taxes and tariffs, non-tariff barriers, such as regulatory legislation and quotas, and even inter-government managed trade agreements such as the North American Free Trade Agreement (NAFTA) and Central America Free Trade Agreement (CAFTA) (contrary to their formal titles) and any governmental market intervention resulting in artificial prices.
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