The policy of free trade is what? Pros and cons of free trade policy

Consideration of some theories in the field of international trade made it possible to determine the reasons for the trade of countries with each other. However, an equally important issue is the choice of states by a certain type of international trade policy .

Based on theoretical aspects, one can single out a policy of protectionism and free trade. These are the two main types of international trade that contribute to obtaining positive results for the state economy. Let us dwell in more detail on each of them.

Definition of the term "free trade"

Freetrading is a policy in which the state should refrain from interfering in the sphere of foreign trade. Due to this behavior in the country, international trade is developing under the influence of supply and demand. There is another name for free trading. This is a policy of free trade, which should most meet the interests of any state, which leads to the achievement of maximum volumes of products from each of the trading parties.

Definition of protectionism

However, another type of international trade policy is known - protectionism. In this case, the national market is protected from foreign competition with the use of customs tariffs, as well as non-tariff regulatory mechanisms.

Among supporters of both free trade and protectionism, there is a constant discussion about the feasibility of implementing one or other of these policies. Each of the parties to the dispute in the substantiation of their positions puts forward certain arguments.

Fratrederstvo: the pros and cons

This type of policy proves that any interference by the state in the formed interstate commodity exchange is economically harmful.

The arguments of free trade are the use of a general theoretical thesis, based on a comparison of production costs, thanks to which the world economy achieves rational allocation of resources and a high standard of living. The technology of production and the structure of resources in each individual country have their own characteristics, which determine the differences in the national production costs of various products and resources, which is what causes specialization in the division of labor in the international arena. Less expensive and higher-quality resources and products are also allocated there.

With all these positive aspects of free trade, the following features are not considered advantages of free trade. Since the population may prefer domestic products of imported analogues of a higher quality, Russian manufacturers will reduce their production with subsequent dismissal of workers. This fact will lead to a decrease in tax revenues to the state budget. There is also a possibility of increasing the dependence of the state on foreign-made goods, the prices for which will increase and most of the population will no longer be able to buy them. The best result of free trade is the encouragement of producers to improve their products while reducing costs. This fact will lead to lower prices for finished products.

Other arguments in favor of applying the principle of free trade

There are other facts that testify to the benefits of using free trade. These are the arguments:

- Increasing competition in the domestic market of states by attracting external suppliers, which significantly limits the monopoly of local producers;

- stimulation of economic activity of national producers, which are forced to fight with foreign competitors for customers;

- an expansion of the choice for buyers who have the opportunity to compare the price and quality of foreign and domestic products.

Arguments in favor of protectionism

It is necessary to distinguish such basic provisions:

- in the interests of national security, there is a need for self-sufficiency of the economy in the main strategic sectors, due to which the food and resource dependence on other states is not allowed with the help of ensuring the protection of domestic production from foreign suppliers;

- the need to save jobs and then increase them;

- The need to support domestic demand for products of national producers, and not their foreign counterparts;

- Ensuring economic stability through diversification due to the high risk of the emergence of various economic fluctuations in the world economy under the narrow specialization of the domestic economy;

- the need to protect new sectors of the Russian economy that are unable to compete with such foreign producers without government support;

- Creation of favorable conditions for the improvement of some industries at the expense of profits, which can be obtained due to higher prices when customs duties are introduced.

The history of free trade in foreign countries

What is free trade, you can consider the example of managing in the 19th century in England. At that time, freedom of trade manifested itself in the total exemption from various customs duties imported into and exported from England. At the same time, thanks to duty-free sales of its products, as well as the importation of cheap imported raw materials and foodstuffs, England was able to quite successfully obtain high results in its domestic market.

England in the 60's. In the 19th century, bilateral agreements with Belgium, France, Italy, Sweden and Austria were concluded on the principle of mutual favor. Particular attention should be paid to the Anglo-French treaty (1860). At first glance, this agreement would be more beneficial for France, since it is England that repeals all duties on silk and content of French production, and France only reduces the tariff for English coal, cars and wool. However, the British goods, despite the partial imposition of duties, were much cheaper and therefore flooded the French market. Thus, the policy of free trade has helped to preserve England's dominant position in the world market.

Examples of the use of the free trade policy in Russia

The policy of free trade was used in various periods of economic development in Russia. Without delving deeply enough, let us turn to the economic theory of the 20th century. So, in the 80s the Russian market was characterized by a deficit of absolutely all consumer goods. At the same time, the prices were rather low, and the queues were significant. 1992 was marked by the abolition of the state's monopoly on the sphere of foreign trade, which was a prerequisite for a rapid flow of foreign goods to the domestic market. Trade began to develop actively, a layer of entrepreneurs, known as "shuttle traders", arose. They mainly imported from China and Turkey cheap goods, which were sold immediately on the streets near the markets and shops.

The current state of the Russian economy

Today this stage has passed, and the buyer has a choice - to purchase goods of domestic or imported production. A vivid example in this matter is the food market . For example, Russian products have a number of advantages such as naturalness, freshness and the absence of various harmful additives. However, it has a price slightly higher than its foreign counterpart. Yes, and it looks a little worse than overseas products.