Free Trade and Government Regulations
Free trade, a policy that seeks to remove restrictions on trade between countries, has been an issue of
much discussion. While the supporters of neoliberalism claimed that it helps to provide economic
growth, efficiency, and innovation, critics pointed out the negative effects of economic inequality and
environmental degradation. This essay will define and explain free trade, why the concept is good, the
positive and negative effects of free trade, and the functions of government on the concept. Free trade is
economically crucial because it promotes economic growth and cooperation among nations but should
be encouraged with some policy intervention.
Is Free Trade Really Free?
Free trade removes barriers to importing and exporting goods and services across borders. However, the
idea of free trade being 'free' is debatable. In reality, all countries that support free trade use tariffs,
quotas, and regulations to defend their domestic industries and control economic stability (Author, y. p).
Hence, although free trade entails the complete absence of restrictions, it usually changes depending on
political and economic factors.
The Role of Governments in Free Trade
Free trade is still managed to some extent by governments through policy measures, agreements, and
regulation. FTAs are agreements between two or more countries that make mutual commitments that
reduce trade barriers on goods and services (Baier et al., 2019). Some examples include the "North
American Free Trade Agreement" (NAFTA) and the "Trans-Pacific Partnership" (TPP). Their main objective
is to facilitate increased bilateral and multilateral economic relations by reducing the cost of importing or
exporting goods.
Governments also regulate free trade to avoid unfair competition and safeguard national security. Non-
tariff measures include anti-dumping laws, subsidies, and quotas to protect domestic employment and
enterprises (Eken, 2020). Similarly, environmental and labor standards are applied to protect resources
and employees from exploitation to avoid compromising trade standards in its growth process.
Pros and Cons of Free Trade
Advantages of Free Trade
1. Economic Growth: Free trade fosters rivalry and development, essential for economic growth.
This means that different countries can focus on producing goods that they can produce most
efficiently compared to other nations, enhancing productivity (Surya et al., 2021).
2. Consumer Benefits: They buy goods and services at lower prices since competition between the
firms and the market is efficient (Author, y. p).
3. Global Cooperation: Free trade can help bring countries closer politically and economically, thus
limiting the possibility of military confrontations.
Disadvantages of Free Trade
1. Economic Disparities: Some industries and employees enjoy this system more than others,
especially when competing with foreign manufacturers, thus creating unemployment and
inequity within a nation.
2. Environmental Impact: This means there is likely to be increased pollution of the environment
due to increased production and transshipment of goods and goods with enhanced carbon
emissions and natural resources exploitation (Wang et al., 2020).
3. Loss of Sovereignty: International trade may weaken a country’s ability to manage its economy
and adopt various measures because it becomes subject to international rules and norms.
Evaluating the Role of Governments in Free Trade
National governments are under a great deal of pressure to foster free trade while at the same time
protecting their national interests. Thus, proper regulation can help to reduce the negative impact of
free trade, which includes increased concentration of income and emissions. For instance, labor
standards and environmental measures can be used to improve the distribution of trade benefits and
sustainability.
Conclusively, free trade, on the one hand, is an intricate concept that is associated with numerous
benefits and losses. While it may contribute to economic growth, increase customer choices, and
international cooperation, it could also contribute to economic imbalances, environmental issues, and
the loss of national sovereignty. However, it is the role of the government to promote free trade while
regulating the negative impacts. It is also important to state that, with balanced legislation and policies,
it is possible to make trade a less "unfair" process.
References
Baier, S. L., Yotov, Y. V., & Zylkin, T. (2019). On the widely differing effects of free trade agreements:
Lessons from twenty years of trade integration. Journal of International Economics, 116, 206-226.
https://doi.org/10.1016/j.jinteco.2018.11.002
Eken, I. (2020). Anti-Dumping Regulation of the World Market at the Present Stage. Journal of
Management Policy & Practice, 21(1).
Surya, B., Menne, F., Sabhan, H., Suriani, S., Abubakar, H., & Idris, M. (2021). Economic growth,
increasing productivity of SMEs, and open innovation. Journal of Open Innovation: Technology, Market,
and Complexity, 7(1), 20. https://doi.org/10.3390/joitmc7010020
Wang, L., Vo, X. V., Shahbaz, M., & Ak, A. (2020). Globalization and carbon emissions: is there any role of
agriculture value-added, financial development, and natural resource rent in the aftermath of
COP21?. Journal of Environmental Management, 268, 110712.
https://doi.org/10.1016/j.jenvman.2020.110712
Author, (y.p). International Business: Competing in the Global Marketplace.
