Free Trade (Cambridge (CIE) O Level Economics)

The Benefits of Free Trade

• International trade refers to the exchange of goods and services between countries

• International trade involves the exchange of goods/service through exports and imports

• International trade is 'free' when there is no government intervention (quotas, taxes etc.) to reduce or limit trade

• Greater choice: with access to a wider variety of goods/services, the standard of living improves

• Lower prices: with international competition prices fall giving households the ability to buy more

• International cooperation: required for trade helps countries to build better relationships which leads to lower levels of hostilities

• Flow of new ideas: innovative ideas and technology can be shared between countries

• Access to resources: output can increase and costs of production can fall with increased access to raw materials

• Increased efficiency: international competition allows the most efficient firms to emerge and this improves the use of global resources

• Economic growth: exports are a key component of the gross domestic product of many countries and an increase in exports can lead to economic growth

• Economic development: Increased output leads to lower levels of unemployment which leads to higher incomes and a higher standard of living