Free trade is a trade between some of the countries and governments to manage imports from and exports to other countries. In free trade, the government does not interfere with imports and exports by imposing tariffs and subsidies. This free trade agreement has a couple of pros and cons for both to the economy of the country and to the business people. Some of the pros and cons of Free Trade Agreement are as below.
Pros of Free Trade agreement
- Increase in economic growth
With the trade between two countries and governments, free trade automatically increases the economic growth of the country as it allows free movement of people and goods from one country to another. It furthermore brings enhancement in the market with better goods and services.
- Lower government spending
In free trade, governments and states are not forced to spend on extra activities such as tariff accounting and immigration costs. Thus more and more saving means they can have used in other important activities.
- Employment opportunities
Free trade increases employment opportunities for the people by providing a wider market for business people to sell their products which ultimately increase the employment opportunities.
- Less corruption
Free trade means that people are allowed to work freely within the boundaries of another country. So, there isn’t any necessity of additional charges in forms of tariffs which reduces the chances of corruption.
- Foreign direct investment
FDI can be considered as one of the major advantages of free trade between countries. In free trade, goods and services are allowed to move freely between countries. So, ultimately there is foreign exchange into the country which leads to the growth of foreign direct investment.
Also Read: Tariffs Pros and Cons
Cons of Free Trade Agreement
- Labor and environmental abuses
There may be an increase in abuse of the labor by some of the employers as free trade increases employment opportunities and labor will be readily available in the market.
- Theft on intellectual property
Free Trade may lead to the theft of intellectual property by citizens of another county as people from another country can easily travel from one place to another.
- Poor working conditions
Free trade means more and more people will enter the country but it decreases the quality of the working conditions for both citizens and foreigners.
- Destruction of native cultures
As people from other countries come to other countries, they bring with them their own cultures. This eventually influences the traditional culture.
- Edge out domestic industries
Overcrowding of foreign companies may eventually edge out local industries. As more people come into the country and offer their services and goods.
Hence, these are few of the free trade agreement pros and cons. Many countries are facing problems due to this while some require such.