Free Trade Trade

Free Trade Trade

Free Trade, trade unencumbered by tariffs, quantitative restrictions or other devices obstructing the movement of goods between countries. The free trade doctrine, arising out of the classical theory of international trade, is that the fewer the obstructions to trade between countries the more fully the world's economic resources will be used and the higher living standards will be. This deduction follows because free trade tends to extract the maximum advantage from international specialization, with consequent gains in efficiency and world economic welfare. The special endowments of different areas are made generally available: all countries are enabled to buy freely from abroad whenever imports cost less in terms of exported resources than they would if produced at home, and they are encouraged to use home resources with maximum efficiency by concentrating them on lines of production in winch their relative efficiency is largest.

The broad principle is still widely accepted, even among economists who question specific aspects of the classical doctrine as enunciated by Adam Smith, Ricardo, Say, Bastiat and J. S. Mm. The classical doctrine always admitted exceptions. Adam Smith, in The Wealth of Nations, following his dictum that defence is of much more importance than opulence', was prepared to extend protection to industries 'necessary for the defence of the country'. On these grounds he considered the Navigation Acts to be 'perhaps the wisest of all the commercial regulations of England'. He also admitted a case for countervailing import duties on foreign substitutes when similar taxes were levied on home-produced goods. But he gave only qualified approval to retaliatory tariffs as a bargaining counter to secure the removal of other countries tariffs.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this site is therefore not a final statement of economic doctrine.

Economics is in the last resort a technique of thinking. The reader will therefore need to make an intellectual effort, more substantial for some web entries than for others, to get the most interest and value out of this website.