FREE TRADE

Synonymes ou variantes : FREE TRADE POLICY
Équivalents : LIBRE COMERCIO
LIBRE-ÉCHANGE
Domaine : Economy

Définition

The free movement across borders of goods, services, capital and people, without the imposition of any tariffs or other barriers, such as quotas, government procurement rules, or import and export licences. By extension, the economic policy that recommends free trade.
(adapted from Goode, Walter, Dictionary of Trade Policy Terms, Fourth Edition, Cambridge (UK): Cambridge University Press, 2003, pp. 145-146)

Contexte

"While internationalism and equitable global trading allowing fair development is probably what most people would like to see, the current model of corporate-led free trade and its version of globalization that has resulted, has come under criticism by many NGOs, developing nation governments and ordinary citizens."
(Shah, A., Free Trade and Globalization, Global Issues, visited 2009-07-13)

"It's difficult to persuade the poor of the benefits of free trade while the rich are protectionist; even though the theoretical argument in favour of open markets is still valid in such circumstances, the political rhetoric of ‘fair trade' and counter-protectionism is very powerful."
(Brown, C., "A World Gone Wrong?," in Held, D. and A. McGrew, The Global Transformation Reader: An Introduction to the Globalization Debate, 2nd Edition, Cambridge (UK): Polity Press, 2003, p. 572)

Description

Theory

In 1776, "the economist Adam Smith exploded the mercantilist idea in his influential book, The Wealth of Nations. A country's wealth, he argued, lies not in the amount of silver in its vaults, but in the labour and enterprise of its people. Free trade benefits both sides: why build costly hothouses to grow grapes in Scotland, when you can buy wine cheaply from France? And his ideas led to the great Nineteenth-Century free trade era and the wide prosperity that came with it."
(Adam Smith Institute, visited on 2009-07-19)

The Reality

Theory and practice are two different things. Even when international trade of goods and services is without any tariff or other trade barrier, or when labour and capital move freely between countries, there are trade-distorting policies (such as taxes, subsidies, regulations or laws) that give domestic firms, households or factors of production an advantage over foreign ones. That's why it can be said that free trade has in fact never existed. States have preferred to slow down their liberalization, but under pressure from GATT and the WTO, they continue to liberalize their policies.

"In January 1994, Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA) and formed the world's largest free trade area. The Agreement has brought economic growth and rising standards of living for people in all three countries. In addition, NAFTA has established a strong foundation for future growth and has set a valuable example of the benefits of trade liberalization."
(Foreign Affairs and International Trade Canada, Canada and the North American Free Trade Agreement , visited on 2009-07-13)

Debate

The principal argument in favour of free trade is that of increased economic well-being. Economists argue that this well-being comes from the gains obtained by the opening of borders, which, they argue, outweigh the costs. Free traders also use the development of economies of scale in production, and the diffusion of innovation as arguments in favour of free trade, the idea being that the opposite alternative, that is, the reduction of international competition, encourages the protection of local industries through customs barriers, causing a surplus of businesses in the domestic market and preventing the development of a scale economy.

However, some economists argue that, in some cases, active governmental trading policies can contribute to national economic well-being rather than diminishing it. These theories suggest that only the small countries whose prices are imposed by the world market will benefit from increased economic well-being through free trade, whereas rich countries can simply determine global market prices regardless.

The second argument in favour of protectionism concerns domestic market failures. The sectors involved are generally subject to labour market restrictions (particularly for unskilled labour) and, to a lesser extent, to financial restrictions, and are therefore in need of protection.

Indeed, it is not uncommon for so-called "free trade agreements" to impose trade restrictions, because of domestic political pressure by corporate, environmental or labour interest groups seeking special protections of their perceived interests.

Relations sémantiques

Hiérarchiques

PROTECTIONISM

Associatives

Free trader
COMPARATIVE ADVANTAGE
Liberalization of trade
Liberalization of world trade
Open economy
Open market
European Free Trade Association
Free trade agreement
North American Free Trade Agreement
Common market
Free Trade Area of the Americas
Free-trade area
© Jeanne Dancette