Trade Flashcards
1
Q
Define free trade
A
Occurs when international trade is not restricted nor encouraged by direct govt intervention
2
Q
What are the benefits of free trade
A
Firms with comparative adv —> export more
Competitive pressure —> increased productivity
Greater choice of g/s
Higher world living standards
Higher GDP
3
Q
What are the drawbacks of free trade
A
Inefficient businesses in domestic economy lose out —> loss of jobs
Protection against dumping so domestic market is not destroyed by foreign competition
Lower price imports cause job losses and reduced GDP —> infant firms have higher unit costs
