The essay discusses free trade and how it can increase the standards of living in both developed and developing countries. The paper focuses mainly on how free trade can affect the standards of living with respect to the following issues: education, poverty, job employment sector, healthcare, peace and security, organization for economic and development, as well as infrastructure and economic growth.
Free trade refers to the policy that poses no restrictions for international exchange of goods. With free trade, the countries can facilitate buying and selling of goods, as well as services, with the other nations with no limitations, such as duties, tariffs, or quotas. With the introduction of free trade, nations are expected to maintain a win-win proposition. This is due to the fact that they are granted an opportunity to concentrate on their main competitive advantages. Countries will get an ample opportunity to maximize their economic output thus ensuring the income growth for its citizens (Hanson & Zott 2013). Free trade will be beneficial to both the developed and developing countries. This policy will help boost the economies of the two worlds in different aspects as explained below.
The ability of the countries to trade freely is the key source of education; it allows people learn new opportunities, make valuable choices and thus improve their standards of living. Many countries can study and experience other economic systems such as capitalism or state controlled economy. They receive valuable knowledge on the international trade and investment choices. Free trade offers sound infrastructure based on economic freedom, assured property rights, and fairer and more independent systems of justice. It also enlightens people on efficient flow of capital, as well as on the benefits of adopting a fair system of low taxation. It helps especially the poor nations in creating economic environment that is friendly to trade and attractive to foreign investors. Education system is also enriched in that the countries share their knowledge, views and ideas. People get to learn many ways of improving their economies and implement them in the development of their home nations. Moreover, it helps establish legal systems of protecting the property rights, learn on the contracts enforcement, and make reforms in the banking and financial systems thus creating viable avenues for the markets to flourish.
Poverty has always been one of the major problems facing the developing world. It has become a contagious disease among the low developed nations, thus barring social and economic growth in those countries. With the introduction and implementation of free trade, people will be able to be actively engaged in productive activities that will generate income for them. New employment opportunities for the unemployed are also crucial as they will allow reducing the poverty levels. Consequently, the income that people will earn from their jobs will serve as an important tool of reducing the level of poverty in the less developed nations. Continued income increases the rate at which people make savings, a key component of eliminating the vicious cycle of poverty (Young 2009).
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Free trade is a key creator of the employment opportunities in many countries. International trade comes along with the creation of many markets to offer and cater for a wider variety of goods and services for the purpose of trade. Exportation and importation of products will become the order of the day, thus creating new employment opportunities for the unemployed. People who have no work will be capable of generating activities to earn their income. Free trade also spurs innovation and competition among the trading partners. Increased competition help in implementing innovations to come up with the higher quality products for exchange. It will also increase the production rates and the rate at which labor is demanded; thus, it will create a good avenue for providing employment opportunities for the unemployed.
Free trade promotes better and improved healthcare services. With openness in trade, human development is fostered. With increased involvement in the free trade activities, the countries are able to acquire more in terms of economic growth. This policy, in turn, translates to greater income of the citizens in that particular country, which can be used for the improvement of their living conditions. The governing authorities of these countries will be in a better position to spend more on healthcare and provide improved, safer, and effective public health system and policies for its citizens. Improved health care can also benefit from the knowledge spillover between the trading nations. With smooth operation of international trade, there is an increased global diffusion of both knowledge and products that ensure better health outcomes. The outcomes range from studying basic knowledge to provision of the modern pharmaceuticals and medical devices.
Peace and Security
Introduction of the free trade into the relationships between the developing and developed nations is very important in strengthening international ties and cooperation of the members involved. Free trade comes with the creation of trade links between the countries. It also breeds and encourages strong cooperation with the capital inflows. Good trading relations between the countries are the sole foundation for ensuring peace and stability in the international affairs. This effect is strengthened much more by the fact that the countries have different resources. For example, if country A is endowed with the capital abundance while country B has capital shortages, free trade will thus take place in a conducive way so as to create a balance between the two nations. The fact that different nations have different resources encourages investment and trading activities; thus, the trading countries become beneficial to each other (Bhagwati 2003). It is also a major source of international peace, security and political stabilities for many economies.
Free trade is liable for economic development in many nations. Investment would not be possible if there was no possibility of trade among nations. Separate companies and even whole economies of many countries would not make investments abroad. This can be explained by a simple scenario. For example, there are two counties, country A and country B. Assume that the cost of labor is smaller in country B than in A. If there are no barriers for trade between the two countries, a company, name it D from country A can come with a labor intensive production workshop into country B. With setting up the production workshop, A is able to export its products back to its country. Country B accrues benefits from such an undertaking in that it benefits from the investment. This phenomenon can be explained by the fact that there is decline in unemployment while, at the same time, people have higher levels of disposable income. Ultimately, it will create an increase in demand. On the other hand, country A benefits depend on its labor market. Investments in the trading nations will be interlinked with the capital flows, depending on which the country will have capital abundance. The two countries will try to work out on a trading mechanism that will allow the two counties to make a breakthrough in their economic development. Therefore, at the end, economic development will be experienced in both nations, as a result of the unrestricted trade among the two countries.
Free trade involves international trade activities. These trade activities cannot thrive in a country that has poor infrastructure. Exportation and importation of goods and services has to be complimented by effective and efficient systems of infrastructure. They include transportation both by road, rails, air, and water, communication systems, energy resources, as well as many other aspects. Such developments are stimulated by the free trade taking place in a country.
The introduction of free trade among the nations will be a key factor in propelling their economic growth. In many cases, especially in the developing world, the domestic markets of such countries are relatively small. It means that the economies of scale in those countries cannot be fully exploited. Free trade is a stimulus strategy. With the free trade intervening into those countries; the market will be opened up demanding more products for the trade to thrive. The opening of many free markets requires products to satisfy the demand in the market. The producers are motivated to produce more supply of goods and service to meet the demands in those markets (Peloso 2005).The expansion of the trading activities between home countries and the foreign markets serves as a valuable channel of expanding the domestic markets. Improvement in the trading capabilities of a country improves the effectives in the economy hence its growth. There is also an increased specialization of the production methods. With improved productions means, the quality products and services enter the free trade markets thus further improving the effectives of the economy.
Introduction of the free trade means the creation of economic dynamism. Free trade fosters economic freedom, opportunity, and prosperity that will benefit each and every citizen, improving their standards of living. It comes with freedom of movement and increased opportunities to all economic levels of the societies. It proves social and economic breakthrough both in the developed and developing countries. With these two economic worlds embracing economic freedom and greater prosperity, the standards of living of the citizens are improved, leading to a better future. The above discussion is a clear elaboration of the benefits that come with the free trade, translating to better and improved standards of living.