What do you know about the history of economics? You may be familiar with mercantilism, protectionism, but what about free trade? It is also part of the economy, and although we must go back to the XNUMXth century, the truth is that some may consider that it persists today.
But what is free trade? What characterize it? How is it different from protectionism? Is good or bad? All of this is what we want to discuss with you.
What is free trade
Free trade, also known as free trade, is actually a practice in economics. The objective was (and is) to promote a commercial exchange between several countries. To do this, it advocates eliminating the obstacles that may exist in customs so that there are no problems either when exporting or when importing.
Obviously, the countries that benefit the most are those that want to export, since in this way they can produce large quantities of products that will not have a problem entering other countries.
The RAE itself (Royal Spanish Academy) defines free trade as an "economic policy that removes obstacles to international trade". And it is what it does, since there are no customs obstacles, the countries that want to export can do so without having to endure slowdowns in shipments, or economic charges; In addition to being able to import (that is, buy in other countries) what they need without it being a problem for them.
This is currently regulated by free trade agreements, international agreements or between countries, etc. But in its day it was not so "pretty".
The origin of free trade
If you want to know exactly when and where free trade began, you have to look back. Specifically to the eighteenth century. At that time, where mercantilism reigned, you have to place yourself in England, since, according to the writings that are preserved, it seems that it was the first country that began to apply it. In fact, it was so successful that it spread to other countries during the XNUMXth century.
Free trade vs protectionism
Free trade is closely related to protectionism. But not because they are the same, but because they are contrary.
Protectionism is characterized by carrying out an economic practice in a country, encouraging its own industry over that of foreigners. In other words, it is committed to national production over imports.
To do this, with the aim of stopping these imports and so that consumers do not see them as an "opportunity", in addition to other countries not seeing it as profitable to send their products and/or services to that country, taxes, levies, fees are established. , fees, etc. to make it more expensive for the consumer to receive those products and/or services. But also for foreigners who send it.
This has a specific objective: to promote self-sufficiency. That is, that the country is self-sufficient and does not need others to survive.
Obviously, this is not easy to achieve. And although many countries promote the national product, they also import and export under free trade.
Advantages and disadvantages of free trade
It is clear that the fact that a country does not put obstacles or have tariffs, quotas, etc. stopping import and export from and to other countries is a good thing. But it's also bad on the other hand.
And is that This economic practice has its good and bad parts.. Among the former, there is no doubt that the alternatives of consumers, as well as producers, are increasing to obtain products and/or services with a greater variety (being able to adapt supply and demand, lower costs, etc.).
By having more opportunities, the price can be reduced in many cases, but efficiency and productivity are also increased.
In addition, We are talking about opening countries to trade with each other. Imagine that you have a bottle factory. It is possible that you already distribute in Spain but, by using free trade, you could also market your product with other countries, with which there is an international development of that business (and therefore, the benefits and growth of the company are greater).
Now, is everything good? The truth is that no. In free trade there are political disadvantages, in the fact that, by depending too much on a country because that product or service is not developed in its own, one is "subject" to what the country says, be it with respect to price, conditions, etc.
To this can be added the competitiveness. If the companies of a country already compete with others from the same country, and many close, when free trade acts and consumers are allowed access to other countries that sell those products or services, they are going to put on a balances price and quality, and can be the cause of many business closures due to lack of profits (and debt or costs of staying open).
Lastly, Another of the disadvantages of free trade is, without a doubt, a dependence on the country. When you bet on importing everything that is not produced in the country, dependency is fostered, since other countries are needed to be able to bring those products or services necessary to carry out others. For example, imagine that in Spain there are no bananas. We would be required to export them from other countries. On the other hand, if instead of that we produce bananas and bet on that production, we would be being independent. Regardless of whether it can continue to be imported or not.
Is free trade good or not?
There is no easy answer to answer this question, since, since it arose in the eighteenth century, there have been many authors and economists who have debated whether or not it is the best for countries.
There are those who see it as a way of helping each other between countries. Since in this way the economy moves and "ensures" a viable minimum for imports and exports. However, many others speak of the dependency that is generated in countries that do not promote what they import, forcing themselves to accept the conditions that others impose (beyond those eliminated tariffs).
As you can see, many authors are for or against free trade. And they are based on these advantages or disadvantages that we have mentioned. What do you think about it?