Free trade is one of the most debated topics of the 20th and 21st century. Different arguments are used by those who favour and by those who oppose free trade, or feel that more constraints are needed. These arguments can be divided in economic, moral and sociopolitical arguments. While the academic debate among economists is currently settled in favor of free trade, critics assert that economics should not be considered a science because its claims are not always strictly falsifiable. The debate among the public and politicians continues on. Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... This article needs additional references or sources for verification. ... Part of a scientific laboratory at the University of Cologne. ... In science and the philosophy of science, falsifiability is the logical property of empirical statements, related to contingency and defeasibility, that they must admit of logical counterexamples. ...

Arguments for free trade

In the history of free trade, two types of argument have been advanced in favor of allowing purchases from abroad, and free trade in the broader sense. A history of free trade or general trade would include the earliest concepts of exchange and barter of products and services. ...

1. The first set of arguments are essentially economic, that free trade will make society richer. These are mostly technical arguments from the discipline of economics, starting especially with Smith's The Wealth of Nations, which overthrew the mercantile orthodoxy.
2. The other set of arguments for free trade could be classified as "moral" arguments listed below.

This article needs additional references or sources for verification. ... Adam Smith FRSE (baptised June 5, 1723 O.S. / June 16 N.S. – July 17, 1790) was a Scottish moral philosopher and a pioneering political economist. ... Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of the Scottish economist Adam Smith, published on March 9, 1776 during the Scottish Enlightenment. ... Mercantilism is the economic theory that a nations prosperity depended upon its supply of gold and silver, that the total volume of trade is unchangeable. ... A moral is a one sentence remark made at the end of many childrens stories that expresses the intended meaning, or the moral message, of the tale. ... // Classical economic analysis shows that free trade increases the global level of output because free trade permits specialization among countries. ...

Economic arguments for free trade

Classical economic analysis shows that free trade increases the global level of output because free trade permits specialization among countries. Specialization allows nations to devote their scarce resources to the production of the particular goods and services for which that nation has a comparative advantage. The benefits of specialization, coupled with economies of scale, increase the global production possibility frontier. An increase in the global production possibility frontier indicates that the absolute quantity of goods and services produced is highest under free trade. Not only are the absolute quantity of goods and services higher, but the particular combination of goods and services actually produced will yield the highest possible utility to global consumers. Classical economics is widely regarded as the first modern school of economic thought. ... This article or section does not cite any references or sources. ... Division of labour is the breakdown of labour into specific, circumscribed tasks for maximum efficiency of output, particularly in the context of manufacturing. ... Scarcity is a central concept in economics. ... Classical economics distinguishes between three factors of production which are used in the production of goods: Land or natural resources - naturally-occurring goods such as soil and minerals. ... In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... The increase in output from Q to Q1 causes a decrease in the average cost of each unit from C to C1. ... In economics, the production possibility frontier (the PPF, also called the production possibilities curve (PPC) or the “transformation curve”) is a graph that depicts the trade-off between any two items produced. ... In economics, utility is a measure of the relative happiness or satisfaction (gratification) gained. ...

Qualitative arguments

Free trade policies are often associated with general laissez-faire economic policies, which permit faster growth. Laissez-faire policies—the absence of government intervention in trade, entrepreneurship and investment—is often positively correlated with high per capita income. ^[1] Voluntary exchange, by virtue of its voluntary nature, is beneficial to the parties involved (why else would they engage in the exchange?). Thus, the restriction of voluntary exchange restricts commerce and ultimately the accumulation of wealth. Look up laissez faire in Wiktionary, the free dictionary. ... Per capita is a Latin phrase meaning for each head. ... Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. ...

Production possibilities frontiers and indifference curves

Here is the production possibilities frontier for a fictional country, Country A. For simplicity, assume that the country produces only two goods, meat and rice. Because the country has limited resources, the production of an additional unit of rice means some resources must be diverted away from the production of meat. The particular rate of trade-off between meat and rice is not important for this analysis, so it can be ignored.
File links The following pages link to this file: Free trade User:Feco Categories: GFDL images | Graphs (images) ...

Here is the production possibilities frontier for a second fictional country, Country B. Again; the country can produce only the same two goods, meat and rice. Like before, limited resources mean that the production of an additional unit of rice means some resources must be diverted away from the production of meat. The particular rate of trade-off between meat and rice is not important for this analysis, so it can be ignored. The fact that the two countries have different relative rates of trade-off is important. This difference gives rise to a comparative advantage, a key concept in economics. Even if one country has an absolute advantage in the production of all goods, both nations can benefit from trade due to comparative advantage.
File links The following pages link to this file: Free trade User:Feco Categories: GFDL images | Graphs (images) ... In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... A country has an absolute advantage economically over another, in a particular good, when it can produce that good more efficiently. ...

The first two images above assume a state of autarky, which means no trade occurs between the two countries. If free trade is possible, the green line is the production possibilities frontier for the entire world. The world PPF is made up by combining the two countries' PPFs. Linear PPFs will always combine to form a shape with an inflection point, as shown at right. File links The following pages link to this file: Free trade User:Feco Categories: GFDL images | Graphs (images) ... An autarky is an economy that limits trade with the outside world, or an ecosystem not affected by influences from the outside, and relies entirely on its own resources. ... The word linear comes from the Latin word linearis, which means created by lines. ... Plot of y = x3 with inflection point of (0,0). ...

Compare the world's production possibilities frontier with each individual nation's. Clearly, the world can produce and consume more when free trade is allowed. To arrive at the world's production possibilities frontier, vector addition must be used. Country A and Country B's meat and rice outputs must be added together for each possible production point.
A vector in physics and engineering typically refers to a quantity that has close relationship to the spatial coordinates, informally described as an object with a magnitude and a direction. The word vector is also now used for more general concepts (see also vector and generalizations below), but in this...

An intuitive way of arriving at the world's production possibilities frontier is to first assume that each country tries to specialize by producing only one product. In the graph at right, the first units of meat are produced only by country B (red). Once country B is using all its resources to produce meat, then country A (blue) begins shifting resources away from the production of rice and into the production of meat. On the other axis, assume that the first units of rice are always produced by country A. Additional units of rice can only be obtained if country B shifts some resources into rice production.
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Returning back to country A, here is the same production possibilities graph, now with indifference curves added in. Indifference curves are a measure of preference and utility. Interplay between the country's preferences and production result in the actual combination of goods produced and consumed. Remember, this is the state of Country A under autarky.
File links The following pages link to this file: Free trade User:Feco Categories: GFDL images | Graphs (images) ... An indifference curve is a graph showing different bundles of goods, each measured as to quantity, to which a consumer is That is, at each point on the curve, the consumer has no preference for one bundle over another, as they render the same level of satisfaction (utility) for the... Preference (or taste) is a concept, used in the social sciences, particularly economics. ... In economics, utility is a measure of the relative happiness or satisfaction (gratification) gained. ...

Here is the same view of Country B's economy. Again, the actual combination of goods produced and consumed is dependent on the country's productive abilities and its citizens' preferences. Thus, it is not surprising that the combination of goods consumed in Country B differs from that in Country A.
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Graphical information of the two countries can be combined in a single graph, as shown here.
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When the two countries' autarkic consumptions are added, the total quantity of each good produced/consumed is less than the world's PPF under free trade. This indicates that by trading, the absolute quantity of goods available for consumption is higher than the quantity available under autarky.
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Reciprocal free trade is in exporters’ interests

An early lobbying effort on behalf of free trade was made by the businessmen of the Anti-Corn Law League. Some of these gentlemen owned textile factories, and believed that repeal of the Corn Law import-ban would allow 1830s Britain to sell cotton clothing to wheat-exporting nations. David Ricardo famously intervened on the anti-corn law side developing his theory of comparative advantage in the process. The Corn Laws, in force between 1815 and 1846, were import tariffs ostensibly designed to protect British farmers and landowners, against competition from cheap foreign grain imports. ... “fabric” redirects here. ... This article or section does not cite any references or sources. ... The Corn Laws, in force between 1815 and 1846, were import tariffs ostensibly designed to protect British farmers and landowners, against competition from cheap foreign grain imports. ... Events and Trends Electromagnetic induction discovered by Michael Faraday Dutch-speaking farmers known as Voortrekkers emigrate northwards from the Cape Colony Croquet invented in Ireland Railroad construction begins in earnest in the United States Egba refugees fleeing the Yoruba civil wars found the city of Abeokuta in south-west Nigeria... Cotton ready for harvest. ... David Ricardo (18th April, 1772–11th September, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. ... In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ...

Although this argument is rooted in Mercantilism and protectionism by domestic producers, it amounts to a voice in favour of free trade. See also: Reciprocal Trade Agreements Act. A painting of a French seaport from 1638, at the height of mercantilism. ... The Reciprocal Trade Agreements Act - 1934 - Provided for the negotiation of tariff agreements with separate nations, particularly Latin American countries. ...

In 1950 Jacob Viner showed that a trading bloc mutually lowering tariffs would produce gains not merely on the demand side but also on the supply side. This was called trade creation, the benefits to the supply side as a whole accrue as resources are reallocated towards firms producing at the highest comparative advantage (among the partners) in each country. Year 1950 (MCML) was a common year starting on Sunday (link will display the full calendar) of the Gregorian calendar. ... Jacob Viner (May 3, 1892 - September 12, 1970) was a noted economist. ... Look up supply in Wiktionary, the free dictionary. ... Trade creation is an economic term related to international economics in which trade is created by the formation of a customs union. ...

Moral arguments in favor of free trade

The 18th and 19th century intellectuals who backed free trade rarely did so under the rubric of increasing material wealth. In many cases this was given as the least important reason for free trade. Rather, they argued that international society would be improved by increased commerce. Some of these, and later, sociopolitical arguments are listed here.

Free trade is a right

The libertarian position argues that any trade restraint is immoral a priori, since restricting the rights of sovereign consumers to purchase foreign goods is outside the competence of legitimate government. This is in the tradition of the anti-Corn Law radicals, like Richard Cobden, who concluded their 1838 parliamentary petition with an appeal to "negative liberty": See also Libertarianism and Libertarian Party Libertarian,is a term for person who has made a conscious and principled commitment, evidenced by a statement or Pledge, to forswear violating others rights and usually living in voluntary communities: thus in law no longer subject to government supervision. ... The terms a priori and a posteriori are used in philosophy to distinguish between two different types of propositional knowledge. ... Consumer sovereignty is a term which is used in economics to refer to the disputed notion of the rule or sovereignty of purchasers over producers in markets. ... Richard Cobden Richard Cobden (June 3, 1804 – April 2, 1865) was a British manufacturer and Radical and Liberal statesman, associated with John Bright in the formation of the Anti-Corn Law League. ... | Jöns Jakob Berzelius, discoverer of protein 1838 was a common year starting on Monday (see link for calendar). ... The philosophical concept of negative liberty refers to an individuals liberty from being subjected to the authority of others. ...

Holding one of the principles of eternal justice to be inalienable right of every man freely to exchange the result of his labour for the productions of other people, and maintaining the practice of protecting one part of the community at the expense of all other classes to be unsound and unjustifiable, your petitioners earnestly implore your honourable House to repeal all laws relating to the importation of foreign corn and other foreign articles of subsistence, and to carry out to the fullest extent, both as affects agriculture and manufactures, the true and peaceful principles of Free Trade, by removing all existing obstacles to the unrestricted employment of industry and capital.^[1]

Increased commerce means reduced war

The argument for free trade that commonly underlies neoliberal foreign policies can be made from the perspective of national security - it is seen by some policy analysts that countries that trade with each other are less likely to go to war due to the enormous cost of suddenly disrupting their trade abroad, particularly since they would be dependent on the world economy as a result of specialization and comparative advantage. The term neoliberalism is used to describe a political-economic philosophy that had major implications for government policies beginning in the 1970s – and increasingly prominent since 1980 – that de-emphasizes or rejects positive government intervention in the economy, focusing instead on achieving progress and even social justice by... In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ...

Qualitative analysis suggests that free trade encourages economic interdependence between countries, reducing the likelihood of war. However, the belief that free trade would reduce war was hypothetical rather than empirical (at least until the 1950s). Twenty-two years after Ricardo advanced his theories of comparative advantage they were used as justification by the British to start the Opium wars. Also, it is hard to know when the occurrence of free trade has prevented the outbreak of war, but easy to know when it hasn't; critics of free trade sometimes cite the First World War as an instance where developed, industrialized countries with reasonably extensive trade links abruptly broke off those trade links and entered into a particularly destructive war; it must be noted, however, that most industrialising nations, with the notable exception of Britain, raised trade barriers and tariffs from the late 19th century onwards. It is an open question whether the First World War, its causes, and the economic environment that preceded it are sufficiently similar to the modern globalized economy to draw parallels between 1914 and the present. This article needs additional references or sources for verification. ... This does not cite any references or sources. ... David Ricardo (18th April, 1772–11th September, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. ... In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... Combat at Guangzhou during the Second Opium War The Opium Wars (Simplified Chinese: ; Traditional Chinese: ; Pinyin: ), or the Anglo-Chinese Wars were two wars fought around the middle of the 19th century (1840-1843 and 1856-1860 respectively) that were the climax of a long dispute between China and Britain. ... Ypres, 1917, in the vicinity of the Battle of Passchendaele. ... Year 1914 (MCMXIV) was a common year starting on Thursday (link will display the full calendar) of the Gregorian calendar (or a common year starting on Wednesday of the 13-day-slower Julian calendar). ...

The fact that some wars have been fought between trading-partners does not disprove the notion that increased trade lowers the willingness to go to war, simply that however much it does so, other considerations sometimes overwhelm the economic. McDonald's is in the vanguard of global free trade, permitted to spread its brand of consumerism by the free trade in capital (its product is mostly sourced locally). Famously, only a single, short, war has been fought between any of the 122 countries having franchises. This fact might not be due to the ties of trade, but could still be attributed to the homogenizing effects of free trade, as identical consumers the world over see less reason to wage war on one another. McDonalds Corporation (NYSE: MCD) is the worlds largest chain of fast-food restaurants, primarily selling hamburgers, chicken, french fries, milkshakes and soft drinks. ... Consumerist redirects here. ... This article is about a city that serves as a center of government and politics. ... McDonalds Corporation (NYSE: MCD) is the worlds largest chain of fast-food restaurants, primarily selling hamburgers, chicken, french fries, milkshakes and soft drinks. ...

The process of free trade, especially in post industrial economies, effectively eliminates the existence of unequal resource distribution. Japan imports much of its food source, and in return exports mainly the produce of its extensive and high-tech workforce. Continuing the example, Japan would not likely be able to sustain the population it does today without one of three possibilities: an unbelievable increase in technology to allow for better use of land resources, international trade, or seizing arable land from another state. Trade also allows for better quality produce and competitiveness between nations, effectively raising the living standards of those nations. It would be illogical to many in such a case to jeopardise those living standards for a war. Finally, increased trade leads to increased bilateral communication between nations and as such, wars not focused on resources or land already cured by trade, including ideological arguments become less evident.

After the Second World War many liberals said that the war's ultimate cause had been the restrictive trade practices of Nazi Germany and the British Empire. They thought that free trade would increase the likelihood of a lasting peace. Cordell Hull, the U.S. secretary of state until 1944, believed this, and argued that as trade barriers dovetail with war, so free trade does with peace. The post war consensus expressed at Bretton Woods was that government coordination was necessary to prevent trade wars and competitive devaluations, to ensure free trade and peace. Combatants Allied powers: China France Great Britain Soviet Union United States and others Axis powers: Germany Italy Japan and others Commanders Chiang Kai-shek Charles de Gaulle Winston Churchill Joseph Stalin Franklin Roosevelt Adolf Hitler Benito Mussolini Hideki Tōjō Casualties Military dead: 17,000,000 Civilian dead: 33,000... Nazi Germany, or the Third Reich, commonly refers to Germany in the years 1933–1945, when it was under the firm control of the totalitarian and fascist ideology of the Nazi Party, with the Führer Adolf Hitler as dictator. ... The British Empire in 1897, marked in pink, the traditional colour for Imperial British dominions on maps. ... Cordell Hull (October 2, 1871–July 23, 1955) was an American politician from the U.S. state of Tennessee. ... Wikipedia does not have an article with this exact name. ... A trade barrier is general term that describes any government policy or regulation that restricts international trade, the barriers can take many forms, including: Import duties Import licenses Export licenses Quotas Tariffs Subsidies Non-tariff barriers to trade Most trade barriers work on the same principle: the imposition of some... Wikipedia does not have an article with this exact name. ...

Protectionism sullies the cause of patriotism

Adam Smith thought that protectionism against free trade was a scam on the public on behalf of producers, carried out in the name of nationalism. Even if overall economic interests had not been harmed by tariffs, he was opposed to them on the grounds that patriotism should not be perverted by scoundrels to enrich themselves. Adam Smith FRSE (baptised June 5, 1723 O.S. / June 16 N.S. – July 17, 1790) was a Scottish moral philosopher and a pioneering political economist. ... This article needs additional references or sources for verification. ... Defence of the fatherland is a commonplace of patriotism: The statue in the courtyard of École polytechnique, Paris, commemorating the students involvement in defending France against the 1814 invasion of the Coalition. ...

Tariffs are also internally divisive. See also: Nullification crisis. This article does not adequately cite its references. ...

Free trade reduces poverty

Conflating the "moral" and "economic" arguments are those campaigners who say that increased trade is the best way to relieve extreme poverty throughout the world. Opposing free trade, they argue, is tantamount to supporting economic injustice (as is displayed in the "The Economist" magazine for example). The Economist is a weekly news and international affairs publication owned by The Economist Newspaper Ltd and edited in London, UK. It has been in continuous publication since September 1843. ...

The thrust of this point is that economic and moral issues cannot properly be separated, and that any other particular socioeconomic problems can be combated most effectively through rising living standards.

Bjørn Lomborg's Copenhagen Consensus on international development challenges ranked trade liberalization as third on the list of development priorities; the experts judged that modest costs could yield large benefits for developing nations. (They ranked freer trade as a "Very Good" opportunity for fighting misery along with cheap measures against HIV infection, micronutrient distribution, and anti-malarial programs.) The conference was of the opinion that reducing subsidies and tariffs would improve the well-being of the global poor more than any agricultural, political, or environmental program. They considered that the free trade in labour would also be a significant (although less important) move against poverty, especially if skilled worker migration were permitted. Bjørn Lomborg Bjørn Lomborg (born January 6, 1965) is an Adjunct Professor at the Copenhagen Business School and a former director of the Environmental Assessment Institute in Copenhagen. ... Copenhagen Consensus is a project which seeks to establish priorities for advancing global welfare using methodologies based on the theory of welfare economics. ... This article is about International Development. ... Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... The law of costs is typical of common law jurisdictions. ... A developing country is a country with low average income compared to the world average. ... Species Human immunodeficiency virus 1 Human immunodeficiency virus 2 Human immunodeficiency virus (HIV) is a retrovirus that causes acquired immunodeficiency syndrome (AIDS, a condition in humans in which the immune system begins to fail, leading to life-threatening opportunistic infections). ... Micronutrients for plants: There are about eight nutrients essential to plant growth and health that are only present in very small quantities. ... Malaria is a vector-borne infectious disease that is widespread in tropical and subtropical regions, including parts of the Americas, Asia, and Africa. ... In economics, a subsidy is generally a monetary grant given by a government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. ... A tariff is a tax on foreign goods. ... This article does not cite any references or sources. ... A skilled worker is any worker who has some special knowledge or (usually acquired) ability in his work. ...

Sociopolitical arguments in favor of free trade

Free trade enriches cultures

The whole concept of "preserving culture" is premised on the notion that it is both valuable and endangered. To the extent that local culture is valued, products and services reflective of that culture are desired and thus available among the many alternatives. According to this argument, all major cultures have evolved through hybridization with external influences throughout history. Attempts to subvert this process by erecting trade and investment barriers deprive cultures of the positive influences that keep it from stagnating. This argument focuses on the fact that every culture evolves and that free trade supports cultural exchange, as cultural products can be traded freely. [2]

Free trade enhances national security

Free trade can enhance national security, on the condition that a nation does not trade with its enemies. Free trade increases a nation's relative power vis-à-vis its rivals, because free trade gives optimal economic advantages, which translates into more economic and military power and more technological innovation. A clear example is the US, which enjoys to a certain degree free trade. Without this quite liberal trade the military burden (i.e. its military expenditures of about $500 billion) would weigh heavy on its economy. The closed-economy Soviet Union would have had to spend 15-20% of its GDP if it wanted to equal the US (which now spends almost 4% of its GDP). According to most economists heavy military expenditures slow the economic growth of an economy. The higher the expenditures, the higher the disadvantages. Once the burden becomes too high, an economy recesses, forcing the military expenditures to be decreased. According to many political scientists this was the case in the 1980s in the Soviet Union.

When free-exchange is not free trade

The World Trade Organization was created to open up markets and promote international trade based on the 'Free Trade' paradigm. The WTO creates and monitors agreements to reduce trade barriers, and arbitrates in disputes over foreign market access, and violations of these agreements. Its definition of 'Free Trade' is trade on a level playing field, so that the unlimited exchange of goods between countries is not necessarily 'Free'. If a country with aircraft producers, say, subsidizes corporate research and development (R&D) or enacts regulations requiring the industry to procure its aircraft part suppliers be domestic producers, then the WTO considers this a violation of Free Trade, even when the barriers to trade are not imposed at the national borders in an import-export transaction step (like a tariff). This article does not cite any references or sources. ... For other uses of the initials WTO, see WTO (disambiguation). ... A level playing field is a concept about fairness, not that each player has an equal chance to succeed, but that they all play by the same set of rules. ... Look up aircraft in Wiktionary, the free dictionary. ... A tariff is a tax on foreign goods. ...

Totally free trade

Some economists (especially Libertarians) criticize the WTO’s definition of "free trade" as too narrow. They argue that a foreign governmental producer-subsidy is another form of "comparative advantage"' and should not be used as a reason to impose domestic barriers on the purchase of overseas goods. See also Libertarianism and Libertarian Party Libertarian,is a term for person who has made a conscious and principled commitment, evidenced by a statement or Pledge, to forswear violating others rights and usually living in voluntary communities: thus in law no longer subject to government supervision. ... This article does not cite any references or sources. ... In economics, a subsidy is generally a monetary grant given by a government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. ...

These economists argue that (since the surplus benefit to domestic consumers outweighs the surplus loss of domestic producers) the lower price of foreign subsidized goods is a net positive (as in the standard Ricardian argument) and the source of the "comparative advantage" is irrelevant. Therefore, any import restriction (even on "dumped goods") makes the domestic society as a whole worse off than it would be with unlimited imports. In economics, dumping can refer to any kind of predatory pricing, and is by most definitions a form of price discrimination. ...

This "abolitionist" position has had little governmental support in the developed world, due to the following considerations:

• Producer lobbyists and job-protectionists are more organized than consumer advocates.
• The "artificial" handicap of a foreign subsidy seems much less "just" to local production than advantages deriving from geography, natural resources, or native skill. Electorates often prefer "fairplay" to Utilitarian considerations.
• Despite accepting that a country would be better off without tariffs than with them, some Game Theory models assert that a long-term strategy superior to immediately dropping all tariffs is to negotiate progressively lower barriers bilaterally so as to pry open foreign markets to domestic producers of goods, benefiting both domestic consumers and domestic producers. (The justification for tariffs is not important; tariffs only exist in order to be relinquished.)
• If trade barriers are already low, the threat of a "trade war" of tit-for-tat tariff increases may reduce the temptation for either partner in bilateral trade to raise import barriers.
• It would tend to decrease the political power and revenue flowing to government bureaucrats.

Inequity aversion is the preference for fair rewards and fairplay in Anthropology (in the sub-disciplines sociology, economics, sociobiology, psychology, Evolutionary psychology, and primate behaviourology). ... Utilitarianism is a suggested theoretical framework for morality, law and politics, based on quantitative maximisation of some definition of utility for society or humanity. ... Game theory is often described as a branch of applied mathematics and economics that studies situations where multiple players make decisions in an attempt to maximize their returns. ... A strategy is a long term plan of action designed to achieve a particular goal, most often winning. Strategy is differentiated from tactics or immediate actions with resources at hand. ... A trade war refers to two or more nations raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers. ...

Criticisms of free trade

Protest against U.S.-South Korea Free Trade Area, 2006, Seattle

Much of the dispute over free trade is semantic. The official U.S. interpretation of free trade is opposed to the Vietnamese interpretation, but both governments claim to be in favour of free trade. Similarly, advocates of fair trade criticize free trade as unjust, although their criticisms tend to be directed at neomercantile protectionist policies of the First World rather than the theory of free trade itself. Image File history File linksMetadata Download high-resolution version (2592x1944, 769 KB) File links The following pages on the English Wikipedia link to this file (pages on other projects are not listed): Free trade debate Metadata This file contains additional information, probably added from the digital camera or scanner used... Image File history File linksMetadata Download high-resolution version (2592x1944, 769 KB) File links The following pages on the English Wikipedia link to this file (pages on other projects are not listed): Free trade debate Metadata This file contains additional information, probably added from the digital camera or scanner used... In general, semantics (from the Greek semantikos, or significant meaning, derived from sema, sign) is the study of meaning, in some sense of that term. ... Motto: (Out Of Many, One) (traditional) In God We Trust (1956 to date) Anthem: The Star-Spangled Banner Capital Washington D.C. Largest city New York City None at federal level (English de facto) Government Federal constitutional republic  - President George Walker Bush (R)  - Vice President Dick Cheney (R) Independence from... Certified Fair trade quinoa producers in Ecuador. ... Neomercantilism is a term used to describe a policy regime which encourages exports, discourages imports, controls capital movement and centralizes currency decisions in the hands of a central government. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over...

Economic arguments against free trade criticize the assumptions or conclusions of economic theories. Sociopolitical arguments against free trade cite social and political effects that economic arguments do not capture, such as political stability, cultural diversity, and national security. In economics, an externality is a cost or benefit resulting from an economic transaction that is borne or received by parties not directly involved in the transaction. ...

Economic arguments against free trade

Free trade in raw materials retrogrades development

The argument that a country could get 'locked in' to serving the needs of the world market in raw materials, and therefore not develop industrially was first advanced by Friedrich List in 1841, and received empirical support in the 20th century. It was discovered that African and Arab nations rich in natural resources (e.g. diamonds and oil) developed less rapidly than those nations without such 'bounty'. This is also a sociopolitical argument against free trade, because it is said that: material is the substance or matter from which something is or can be made, or also items needed for doing or creating something. ... Friedrich List (August 6, 1789 - November 30, 1846) was a leading 19th Century German economist who believed in the National System. // He was born at Reutlingen, Württemberg. ... 1841 is a common year starting on Friday (link will take you to calendar). ... World map showing location of Africa A satellite composite image of Africa Africa is the worlds second_largest continent in both area and population, after Asia. ... Languages Arabic other minority languages Religions Predomiantly Sunni Islam, as well as Shia Islam, Greek Orthodoxy, Greek Catholicism, Alawite Islam, Druzism, Ibadi Islam, and Judaism Footnotes a Mainly in Antakya. ... This article is about the gemstone. ... Natural olive oil Synthetic motor oil An oil is any substance that is in a viscous liquid state (oily) at ambient temperatures or slightly warmer, and is both hydrophobic (immiscible with water, literally water fearing) and lipophilic (miscible with other oils, literally fat loving). This general definition includes compound classes...

1. The regimes exporting such valuable commodities to the west tended to be autocratic, and remain in unpopular power because of the massive payment streams from exports.
2. The reason that civil wars and violence are correlated with the discovery of mineral wealth in the developing world is the world market for the commodities. This is one area of free trade which has few supporters, and conflict diamonds cannot be openly imported into any country.

It was also discovered that developed nations uncovering natural resources could suffer as a result of free trade, and for similar reasons. The massive capital influx to the Netherlands after it started exporting oil increased prices in the famous "Dutch disease". Autocracy is a form of government where unlimited power is held by a single individual. ... A conflict diamond (also called a blood diamond or a war diamond) is a diamond mined in a war zone and sold, usually clandestinely, in order to finance an insurgent or invading armys war efforts. ... A developed country is a country that is technologically advanced and that enjoys a relatively high standard of living. ... Dutch disease is an economic concept that tries to explain the seeming relationship between the exploitation of natural resources and a decline in the manufacturing sector. ...

International trade requires more resources to distribute

Delivering food produced on the other side of the world to a supermarket has an environmental impact because it requires the use of fossil fuel in delivery from overseas, as compared to local delivery. However, this critique is dependent upon the productivity of local markets relative to that of foreign markets'. A foreign market's greater productivity may offset the fuel expended for delivery. Conversely, local markets may use resources so inefficiently that importing goods constitutes a more energy-efficient per unit alternative. However, the lower prices achieved therein may beget more consumption, a result not necessarily favored by "greens." In a perfectly efficient market, the costs of the fossil fuels would include the externalities associated with their consumption. Thusly the full impact of their transportation costs would be reflected in the market price of the good. Exterior of a typical British supermarket (a Tesco Extra) Exterior of typical North American supermarket (a Safeway) This Flagship Randalls store in Houston, Texas is an example of an upscale supermarket. ... This article does not cite any references or sources. ... Fossil fuels are hydrocarbons, primarily coal and petroleum (fuel oil or natural gas), formed from the fossilized remains of dead plants and animals[1] by exposure to heat and pressure in the Earths crust over hundreds of millions of years[2]. The theory that hydrocarbons were formed from these...

Deep Green thinkers say that Free Trade claims to lead to the "full employment of resources", and strongly oppose Free Trade in the hope of discouraging the immediate depletion of the earth’s resources. Greens are people who support some or all of goals of a Green Party without necessarily working with or voting for that or any party. ...

Sheltering young industries may pay-off later

Main article: Infant industry argument

New Trade theorists challenge the assumption of diminishing returns to scale, and some argue that using protectionist measures to build up a huge industrial base in certain industries will then allow those sectors to dominate the world market. Less quantitative forms of this "infant industry argument" against totally free trade have been advanced by trade theorists since at least 1848. The infant industry argument is an economic reason for protectionism. ... This article does not cite any references or sources. ... The infant industry argument is an economic reason for protectionism. ... A history of free trade or general trade would include the earliest concepts of exchange and barter of products and services. ...

Free trade favors developed nations in certain areas

Some services exported by developed nations are intangibles, such as medicinal formulae, trademarks, software, and entertainment. The value of this intellectual property is derived from legal protection against unauthorized reproduction. Some advocates of the poor claim that the reason IP-rights are strongly protected in International trade is the power developed nations have to protect the interests of intellectual property owners during trade negotiations. WTO-signatory nations renounce the right to produce generic copies of life-saving drugs, the only affordable treatment in developing nations. Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ...

Influence of foreign firms

Within developing countries, the local populace often eyes multinational corporations with suspicion.^{[citation needed]} Many feel that once allowed free reign they will use their superior resources and experience to sway the political establishment of a country in favor of excessive concessions (tax holidays, underpaying for property, etc.) and try to influence the political system in their interests, which may or may not be shared by the citizenry.

Free trade benefits only the wealthy within countries

Some argue the following:

• The wealthy own more corporate equity, which increases in value as companies are able to produce at the lowest cost in the world.
• As the world's markets merge into a single global market the number of market-leading companies worldwide drops, with international take-overs of local champions by giant corporations. This process concentrates wealth in fewer corporations.
• Free trade replaces low-skilled jobs often done by the poor easier than high-skilled jobs. This implication of the Stolper-Samuelson theorem is challenged on the basis that technology makes offshoring high value-added work feasible and more profitable than moving low-skilled jobs.

According to Ravi Batra's book, The Myth of Free Trade, open trade in the US has resulted in replacement of manufacturing jobs for service jobs, which pay less on average. The product trade deficit results in more investment money flowing into the US as a trade-off. This investment money mostly ends up with wealthy investors and owners; and "trickle down" is not sufficient to compensate for the loss of manufacturing jobs and wagers. According to Batra's research, even though free trade may increase GNP, the increases do not flow to rank-and-file workers. The Stolper-Samuelson theorem is a basic theorem in trade theory. ... Offshoring describes the relocation of business processes from one country to another. ... Ravi Batra is a U.S. economist and professor at Southern Methodist University in Dallas, Texas. ...

Free trade increases offshoring

Free trade allows companies the possibility of outsourcing the production of goods for domestic sale. Environmental and labor standards imposed upon these companies can be less in foreign production. Labor and environmental advocates argue that free trade thereby creates conditions that allow companies to circumvent domestic regulations, by producing elsewhere. As free trade increases, the balance of power shifts in favour of companies and away from governments. This is considered to pose a threat to democratic self-determination by anti-globalizers and authoritarian control by totalitarian states. Free trade supporters argue that all countries have the right to opt out of the world market through isolationism and that companies are fictional persons who are taxed without representation and that the balance of power should shift away from the governments that exploit them. It has also been argued that free trade hurts developed nations because it causes jobs from those nations to move to other countries, and accelerates the "race to the bottom". As well as reducing rich-country GDP through lost jobs, competitive pressures will undermine democracy by creating pressures to lower wage demands, and protections like environmental and safety standards. The "race to the bottom" is blamed on international competition to attract traded-goods production, which, with Free Trade, can be sited anywhere. Outsourcing became part of the business lexicon during the 1980s and often refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. ... Democracy is a form of government under which the power to alter the laws and structures of government lies, ultimately, with the citizenry. ... Wikipedia does not have an article with this exact name. ... The term authoritarian is used to describe an organization or a state which enforces strong and sometimes oppressive measures against the population, generally without attempts at gaining the consent of the population. ... The concept of Totalitarianism is a typology or ideal-type used by some political scientists to encapsulate the characteristics of a number of twentieth century regimes that mobilized entire populations in support of the state or an ideology. ... Isolationism is a foreign policy which combines a non-interventionist military policy and a political policy of economic nationalism (protectionism). ... A company in the broadest sense is an aggregation of people who stay together for a common purpose. ... In government regulation, a race to the bottom is a theoretical phenomenon which occurs when competition between nations or states (over investment capital, for example) leads to the progressive dismantling of regulatory standards. ...

Capital mobility and comparative advantage

Some descriptions of comparative advantage rest on a necessary condition of capital immobility. If financial or labor resources can move between countries, then comparative advantage erodes, and absolute advantage dominates. For instance, the Heckscher-Ohlin model derives comparative advantage from differing relative abundances of capital and labour between countries. Capital mobility and the competitive drive for the highest return on investment would give all countries identical relative abundances for new investment, eliminating comparative advantage and trade. The Heckscher-Ohlin model (H-O model) is a general equilibrium mathematical model of international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. ... In classical economics and all micro-economics labour is a measure of the work done by human beings and is one of three factors of production, the others being land and capital. ... In finance, the return on investment (ROI) or just return is a calculation used to determine whether a proposed investment is wise, and how well it will repay the investor. ...

Other conceptions of comparative advantage are sound in all instances where the factors of production not homogenous between the parties notwithstanding mobility factors.

Given the liberalization of capital flows under free trade agreements of the 1990s, the condition of capital immobility no longer holds. David Korten and other economists argue that the theory of comparative advantage "is replaced by that of downward levelling". However, capital immobility is only one route to comparative advantage, useful to basic models, but not essential to it. For the band, see 1990s (band). ... Dr. David C. Korten is an author and leader within the anti-globalization movement. ...

Basic models assuming capital immobility were convenient and not essential to the principle. Although greater capital mobility is likely to reduce comparative advantage, barriers to capital flows are not the only way to derive it.

• Early qualitative descriptions of the principle were based on the greater ease of producing different commodities in one country than another, and not on capital mobility. The comparative advantage of France over Iceland in wine production is not based on capital immobility.
• As economist Paul Krugman has noted, 19th century economist David Ricardo who formulated the basic model of comparative advantage lived in a period of high capital mobility. His ideas were based on different production functions in different goods (different technologies) internationally. These do not necessarily require capital immobility.
• Comparative advantage can be derived from more complicated models including capital mobility (i.e. international borrowing, lending, and labor movement) and often posit movement of capital as analogous to the movement of goods.

Qualitative is an important qualifier in the following subject titles: Qualitative identity Qualitative marketing research Qualitative method Qualitative research THE BIG J This is a disambiguation page — a list of pages that otherwise might share the same title. ... Commodity is a term that refers to goods that are mined or agriculturally produced. ... A glass of red wine This article is about the alcoholic beverage. ... Paul Krugman Paul Robin Krugman (born February 28, 1953) is an economist who has written several books, and since 2000 has written a twice-weekly op-ed column for The New York Times. ... David Ricardo (18th April, 1772–11th September, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. ...

Diversification and economic bubbles

It is also suggested that unchecked free trade increases the risk of economic bubbles that may affect entire nations and perhaps the world instead of just individuals. Diversification in personal and corporate investment portfolios is commonly accepted advice to reduce risk; similarly, diversity in economies can also act as a buffer against problems with specific product or product category demand. Currier & Ives print on economic bubbles, 1875. ...

Some feel free trade will tend to create economies too dependent on narrow specialties, those that are the numeric comparative advantage. When demand for those narrow specialties drops, the adjustment will be much more difficult than if existing diversification was already in place. It is usually much easier to grow an existing specialty than to start one from scratch when changes require it. Diversification of specialties tends to conflict with strict adherence to the theory of comparative advantage. In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ...

Sociopolitical arguments against free trade

Free trade undermines cultural diversity

Some French critics argue that allowing Hollywood movies to compete against French films would be culturally destructive. Free trade in culture is limited, otherwise, the French language and the visibility of a French perspective on the world would be threatened. Food imports competing with Gallic farmers are limited on the grounds that high food prices are necessary to sustain rural French culture. ...

Throughout the world, forces that many blame on free trade are eroding traditional ways of living and rural cultures. For instance, Sir James Goldsmith attacked free trade for causing the conversion of small-scale agriculture to large-scale agribusiness across the developing world: "The loss of rural employment and migration from the countryside to the cities causes a fundamental and irreversible shift. It has contributed throughout the world to the destabilization of rural society and to the growth of vast urban concentrations. In the urban slums congregate uprooted individuals whose families have been splintered, whose cultural traditions have been extinguished and who have been reduced to dependence on welfare from the state."^[2] James Goldsmith as he appeared in his Referendum Party’s mass-mailed video tape, March 1997. ... It has been suggested that Underdevelopment be merged into this article or section. ...

Many Canadian nationalists argue that the North American Free Trade Agreement or an extension could harm Canadian culture, due to foreign corporations (magazines, television, and satellite providers) challenging Canada's cultural content laws. These laws encourage Canadian content in the media. Secretariats Mexico City, Ottawa and Washington, D.C. Official languages English, French and Spanish Membership Canada, Mexico and the United States Establishment  -  Formation 1 January 1994  Website http://www. ...

Free trade causes excess dislocation and pain

Free trade may change careers too fast. Once, a farmer could expect to finish his or her life as a farmer, although his or her children may have been forced into mining or manufacturing instead. Now, changes happen on a sub-generational level, faster than natural attrition. Coping with these transitions can be difficult, especially for the middle-aged and the elderly due to age itself or age discrimination. A pace of change that matches instead of exceeds generational cycles may be more palatable to populations. Problems associated with economic adaptation are generally not factored into the calculation of free trades' effects. Chuquicamata, the largest open pit copper mine in the world, Chile. ... Manufacturing is the application of tools and a processing medium to the transformation of raw materials into finished goods for sale. ... Middle age is that stage in life when physical decline has started but a person cannot be called old. ... 79 year old man (Paul Kruger in later life) For the song by Hole and Nirvana, see Old Age. ...

Welfare economics deals with the issue of the overall benefit to society of changes that harm some and help others. In a utilitarian view, the overall benefit of cheaper goods and services is given equal weight with the concentrated impact of lost jobs. (With a Kantian application of John Locke's state of nature, however, state-executed welfare violates the natural rights of individuals (see Anarchy, State, and Utopia, Nozick)). Other economists argue that the harmful effect of free trade on some should be given greater weight than the benefit for all. See Pareto optimality. Welfare economics is a branch of economics that uses microeconomic techniques to simultaneously determine the allocational efficiency of a macroeconomy and the income distribution associated with it. ... Utilitarianism is a suggested theoretical framework for morality, law and politics, based on quantitative maximisation of some definition of utility for society or humanity. ... Anarchy, State, and Utopia is a work of political philosophy written by Robert Nozick in 1974. ... Pareto efficiency, or Pareto optimality, is a central concept in game theory with broad applications in economics, engineering and the social sciences. ...

Dependency theory

Main article: Dependency theory.

Critics of imperialism sometimes focused on how imperial powers gained influence over weaker countries through specialization. Weaker countries would develop areas, typically in raw materials and agriculture, that would be economically dependent on the mother country. In the post-imperial world, this criticism changed. Imperial powers that controlled capital flows could maintain their economic status vis-a-vis their former colonies by using this dependency to their advantage. Imperial powers would have more choice (more competitive market) in countries from which they could acquire raw materials than those countries would have in buying final goods, particularly as imperial countries had the bulk of the world's financial resources and chose to behave oligopolistically. This pattern of exploitation, which may or may not lead to the benefit of imperial nations, focuses on the importance of political power in the international system and its weight in policy choices. Main International Relations Theories Politics Portal This box:      Dependency theory is a body of social science theories, both from developed and developing nations, that create a worldview which suggests that poor underdeveloped states of the periphery are exploited by wealthy developed nations of the centre, in order to sustain economic... This article or section does not cite any references or sources. ... An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). ...

The dependency theory is discredited however by modern economists, as this theory lacks empirical validity, as some countries have been able to become economically more developed (often also due to a more liberalised trade).

Free trade undermines national security

One of the arguments of the Corn Laws repeal was national security. Britain ought not be dependent on grain imports to her country, or else she risked putting her national security in the hands of foreign countries. This argument focused on the ability of free trade to threaten the sovereignty of a nation at war. The Corn Laws, in force between 1815 and 1846, were import tariffs ostensibly designed to protect British farmers and landowners against competition from cheap foreign grain imports. ...

This argument had always been questioned on the grounds that every market in the world would have to stop selling at any price for an importer to find itself imperiled, unless a blockade was used. It was said that any nation (especially England) unable to defeat a blockade couldn't hope to win a 19th century war anyway. Although wars were subsequently fought over access to markets these have always been markets in commodities not domestically available (principally oil; see also – Raw materials causes of Japanese expansionism.) In the history of the world, no country has ever suffered military defeat, or capitulated to sanctions, due to the inability to produce a domestically producible product. However, there is no doubt that Britain would have run out of food in both the First and Second World Wars if it had not been able to import food from abroad, particularly from the USA. Britain also discovered in both wars that she had been vulnerably dependent on Germany for many advanced manufactured goods, which again put her at a major disadvantage. Motto (French) God and my right Anthem No official anthem - the United Kingdom anthem God Save the Queen is commonly used England() – on the European continent() – in the United Kingdom() Capital (and largest city) London (de facto) Official languages English (de facto) Unified  -  by Athelstan 927 AD  Area  -  Total 130... Natural olive oil Synthetic motor oil An oil is any substance that is in a viscous liquid state (oily) at ambient temperatures or slightly warmer, and is both hydrophobic (immiscible with water, literally water fearing) and lipophilic (miscible with other oils, literally fat loving). This general definition includes compound classes... The immediate Causes of World War II are generally held to be the German invasion of Poland, and the Japanese attacks on China, the United States, and the British and Dutch colonies. ... Economic sanctions are economic penalties applied by one country (or group of countries) on another for a variety of reasons. ...

In the modern United States and in many developed Western countries, one of the chief arguments in favor of farm subsidies is a national security argument. The threats of bioterrorism and even unintended disease-causing agents has raised the possibility of poorly inspected food entering a country from another, presumably with less stringent food inspections. Like a number arguments against free trade, this argument rests on the inequity of government regulations across countries the world over, although some critics of the US food industry point out that the same argument is used whether or not the standards imposed actually are higher or lower abroad. (See: Fast Food Nation.) An agricultural subsidy is a governmental subsidy paid to farmers to supplement their income, help manage the supply of agricultural commodities, and bolster the market price of commodities. ... For the use of biological agents in warfare, see Biological warfare. ... Fast Food Nation, paperback edition Fast Food Nation: The Dark Side of the All-American Meal (2001) is a book by investigative journalist Eric Schlosser that examines the local and global influence of the United States fast food industry. ...

Technological change is another source of anxiety about free trade. Trade in high-tech equipment can facilitate the implementation of advanced military technology in countries that may become strategic opponents later on. This argument is often compelling to policymakers in developed countries, and free trade rarely applies to military technology, and often special restrictions are placed even on advanced technology developed in the nonmilitary sector.

Students in the US have recently been reluctant to pursue technology careers out of fear of offshore outsourcing or being displaced by visa workers. If the pool of technology experts drops too far due to real or perceived influences of free trade, then the nation may become more dependent on other countries to run infrastructure. For example, if most of our computer servers are controlled from India, then China may be able to cut the undersea cables in a war, leaving the US vulnerable. This article or section does not cite any references or sources. ... Foreign farm worker, New York A foreign worker (also: guest worker or economic migrant), is a person who works in a country other than the one of which he or she is a citizen. ...

If free trade encourages the development of a world market that equilibrates wages, industrialization, and productivity per laborer, this can amount to the armament of strategic opponents. This argument is often brought up in the context of United States-China trade relations; if the Chinese economy were to develop the same production per capita as the United States, China would be able to harness economic resources fourfold what the United States economy could, and, in theory, proportional military resources. Although this concern is widespread within the United States, the desire to keep a potential rival weak is not normally advanced within diplomatic circles. This page is about negotiations; for the board game, see Diplomacy (game). ...

Rule of law and regulations

Although in David Ricardo's time economists regarded the regulatory powers of the state as being more destructive than beneficial, the economic shocks of the later nineteenth century, the early twentieth century and the Great Depression produced a strain of economists led by John Maynard Keynes who criticized laissez-faire capitalism as itself destructive. After the war these Keynesians assisted the state in the development of regulatory institutions that were promoted as limiting the excesses and mitigating the failures of the free market and which were intended to sustain free trade through regulation. The later twentieth century saw the development of new economic theories that criticized the stress on regulatory institutions, though it is an uncommon opinion even among modern neoclassical economists to wholly regard all such regulatory functions of state as damaging to the economy. David Ricardo (18th April, 1772–11th September, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. ... The Great Depression was a time of economic down turn, which started after the stock market crash on October 29, 1929, known as Black Tuesday. ... This article does not cite any references or sources. ... Laissez-faire is short for laissez faire, laissez passer, a French phrase meaning to let things alone, let them pass. First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. ... Mushroom cloud from the nuclear explosion over Nagasaki rising 18 km into the air. ... Keynesian economics, or Keynesianism, is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ... Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ...

These regulatory institutions, and indeed the rule of law itself, are costs to the development of industries. Although a number of laws - the protection of property rights, for instance - are strongly beneficial to corporations interested in the development of an industry in a foreign country, many other laws, regulatory laws in particular, can produce litigation risks or greatly increase the cost of operating in that country. Environmental regulations, labor laws, minimum wages, safety regulations, and (arguably) basic human rights can effectively increase the cost of operating in a country. As a result, these regulations often lead to a competitive disadvantage in the world economy for countries implementing those laws. This page deals with property as ownership rights. ... A lawsuit is a civil action brought before a court in order to recover a right, obtain damages for an injury, obtain an injunction to prevent an injury, or obtain a declaratory judgment to prevent future legal disputes. ...

Similar arguments can be made for tax laws; corporations can evade high taxes by moving operations to countries with lax tax structures. In countries where the integrity of the state is weak, there can be an incentive for corporations to subvert governments through corrupt means and further undermine the rule of law in those countries in their favor. Accounting, banking, and investment regulations can take a similar direction; countries very interested in attracting investment may make their financial institutions more lax for short term political benefits. Some economists, such as Frederic Mishkin, point to this as an underlying cause of the Asian financial crisis of 1997-1998. Frederic S. Mishkin (January 11, 1951) is an economist and currently the Alfred Lerner Professor of Banking and Financial Institutions at the Graduate School of Business, Columbia University. ... The Asian financial crisis was a financial crisis that started in July 1997 in Thailand and affected currencies, stock markets, and other asset prices in several Asian countries, many considered East Asian Tigers. ... Year 1997 (MCMXCVII) was a common year starting on Wednesday (link will display full 1997 Gregorian calendar). ... Year 1998 (MCMXCVIII) was a common year starting on Thursday (link will display full 1998 Gregorian calendar). ...

Many developing countries have not developed the financial institutions that developed countries rely on for the efficient functioning of their economies. The financial institutions that do exist in developing countries are often designed for economies with a strong role built for the state, and often with a great deal of corruption already existing. The influx of large amounts of investment capital from developed countries can put a considerable strain on financial institutions as they cope with enlarging their regulatory role, separating it from old state functions. The capital influx creates lucrative opportunities for corruption, especially within the regulating institutions. The development of these institutions runs a difficult course with investors who are interested both in the rule of law as it improves investment opportunities, and also in limiting their risk as investors. The development of these institutions can be a low priority for a poor country, which must bear the cost of modifying its business code, essentially for the benefit of foreign capitalists. Capitalism generally refers to in philosophy and politics, a social system based on the principle of individual rights, including property rights. ...

Free trade, then, creates an economic incentive for a race to the bottom in regulatory institutions; countries with lax, lenient, non-enforced, or selectively enforced regulatory legal structures will have a competitive advantage in attracting investment to their countries, and not merely in wages. From the capitalist's point of view, an ideal legal environment would have these features: In government regulation, a race to the bottom is a theoretical phenomenon which occurs when competition between nations or states (over investment capital, for example) leads to the progressive dismantling of regulatory standards. ... In economics, a capitalist is someone who owns capital, presumably within the economic system of capitalism. ...

1. Weak or un-enforced labour and environmental protection laws.
2. Low or uncollected taxes.
3. Strong legal protection for property rights.
4. Changes to the legal code should be few and predictable, allowing business planning. The government should not be likely to override the rule of law, or impose exchange controls.

The difficulty that modern capital finds in meeting all of these conditions is that (1) and (2) are correlated with an immature legal system, but (3) and (4) are correlated with the division of powers, and long-standing legal institutions. As Russian oligarchs and early foreign direct investors in China discovered, the ability of an enterprise to make money is no guarantee that its profits can be retained. Some have argued that firms actually encourage (or at least prefer) the rule of law, judging that, on balance, it is "good for business". If so, the "Race to the bottom" may become a "Race to the middle" in legal enforcement, assisted by mobile capital, in order to create the optimum legal conditions for investment (balancing legal protections for labour and capital). Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents. ... Oligarch may refer to one of the folowing. ... The rule of law is the principle that governmental authority is legitimately exercised only in accordance with written, publicly disclosed laws adopted and enforced in accordance with established procedure. ...

In theory, globally harmonized regulations regarding wages, the environment, safety, human rights, and other areas of economic control, would also prevent a "race to the bottom." Although globally harmonized regulations appear to be far off, there have been a number of moves toward regional agreements about these sorts of institutions. However, assumed in the "race to the bottom" argument is that greater labor and environmental regulation yield greater benefits, and are inherently good, contentious points. The stagnation of western European countries, France and Germany particularly, who enforce strong labor and environmental regulations, suggests otherwise.

The financial consequences of mobile capital

The diversity of legal systems the world over and the limited degree to which those bureaucracies coordinate their regulatory and tax-collecting efforts can create loopholes to the benefit of corporations and private individuals, who can seek out havens from regulation and tax collection, even if they obey the letter of the law.

The freedom of capital to move outside the purview of a single authority has other harmful effects, even where it is not invested in the real economy. The following are common abuses of the free trade in capital: Abuser redirects here. ...

• Tax avoidance (legal)
• Money laundering (illegal)
• Obfuscation of corporate accounts (possibly legal)

One of the chief concerns among modern economists and financiers is to develop methods of harmonizing international regulatory institutions, in particular accounting practices, to improve transparency in world financial markets and reduce the risk experienced by investors. This article contrasts tax evasion, tax avoidance and tax mitigation. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... Corporate redirects here. ... ...

A purported, salient benefit of increasingly mobile capital, however, is the competition on tax rates, where countries compete to house companies. Lower tax rates offer a competitive advantage to businesses. This has resulted in calls from some countries, particularly France and Germany, to "harmonize" tax rates, to maintain their high tax system, so that competition therein is impossible.

Stability

Free trade implies specialized industries and economic change. Economic changes can lead to strains and considerable changes to traditional economic and political systems. Social changes that Europe passed through over centuries - urbanization, development of national infrastructure, development of property rights, secular and national government, centralized administration, the development of financial sectors, and regulatory systems - can happen quickly in an economy exposed to free trade and capital flows.

Offshore outsourcing and an increase of temporary visa workers resulted in a drop in the demand for computer programmers in the US, for example. Traditionally, the displacement and change caused by free trade was assumed to mostly fall on the poor and less-educated. However, the plentiful supply of low-cost but well-educated labor in Asia, the former Soviet Union countries, Arab countries, and Israel has cast doubt the view that the educated are mostly immune from change. This article or section does not cite any references or sources. ...

The internet has made it easier for dispersed groups to coordinate work on a project. Thus, education as immunity from the churn of free trade is now being questioned. Education may merely be a prerequisite for participating in free trade, not a barrier from its down-sides.

Free trade and capital flows can conflict with existing systems. Western financial institutions which are based on lending is an affront to some traditionalists. The imposition of property rights, such as in tribal areas where property is held communally or where they existed in a primitive sense, poses considerable difficulties for governments. That question can arouse concerns of justice, equity, class, and ethnic strife between groups that feel victimized by history. Property rights in developing countries and their implications for free trade has been raised by the Peruvian economist Hernando de Soto. Hernando de Soto (born 1941 in Arequipa) is a Peruvian economist known for his work on the informal economy. ...

Free trade can be profoundly redistributive, forcing thousands if not millions to change professions as trade competes their former ones out. In the United States and in many developed countries there are systems of trade adjustment assistance that help to smooth the transition for workers and industries from a pre-globalized economy to an economy transformed by free trade. In countries without those resources, a sense of victimization can rise in laborers displaced by trade that can contribute to a loss of confidence in national policy. Even with trade adjustment assistance in the United States, some of the most outspoken resistance to free trade, in particular to the North American Free Trade Agreement, came from labor unions. Even with assistance to smooth a transition between economic structures, there can be resistance to change in the character of an industry for economic and social reasons. Trade adjustment assistence is monetary compensation or training programs paid for by governments to compensate for loss of jobs due to Free Trade. ... Secretariats Mexico City, Ottawa and Washington, D.C. Official languages English, French and Spanish Membership Canada, Mexico and the United States Establishment  -  Formation 1 January 1994  Website http://www. ...

Free trade can change relationships between classes, interest groups, and economic interests. Balances between groups in society - a disproportionate share of power for an industry or group - can be undermined by free trade.

Changes to the national economy can undermine developing countries. Critics of free trade sometimes point to the fall of the Suharto government in Indonesia in the wake of the Asian financial crisis on sociopolitical stability.

Traditionally only the total value of goods and services are used to calculate the best economic model. However, opponents of free trade feel that change rates should also be a factor. Thus, instability and displacement risks of a given approach are factored. Here is an example:

Traditional economics would favor approach A because it produces the most total goods and services. However, skeptics of full free trade would point out that approach A has a large disruption pace associated with it, and so approach B and perhaps C should be considered because of the stability they provide. Generally there will be some tradeoff between total wealth (goods and services) and stability such that both cannot be maximized at the same time.

Debate on applicability of "free trade" to current economic conditions

Another aspect of the debate over "free trade" revolves around the question of how much the concept accurately describes particular policies or economic conditions. Economists Jagdish Bhagwati and Arvind Panagariya have pointed out that many regional trade agreements tend to divert rather than increase trade.[3] Jagdish Bhagwati (born 1934) is a prominent economist noted for his defense of free trade against the critics of globalization. ...

Economist Dean Baker has argued in his book the Conservative Nanny State that regional trade agreements such as the North American Free Trade Agreement and Dominican Republic-Central America Free Trade Agreement and global trade agreements such as the World Trade Organization cannot accurately be termed "free trade" agreements because they actually increase certain barriers to trade (such as through the creation of monopoly patents for pharmaceuticals), while decreasing other barriers. Baker recommends calling these policies simply "trade" agreements.[4] Dean Baker is an American macroeconomist and co-director of the Center for Economic and Policy Research. ... The term nanny state, used especially in the United States, United Kingdom and Australia, is a derogatory term for state protectionism, interventionism, or regulation policies as they are perceived as being institutionalized as common practice. ... Secretariats Mexico City, Ottawa and Washington, D.C. Official languages English, French and Spanish Membership Canada, Mexico and the United States Establishment  -  Formation 1 January 1994  Website http://www. ... Presidents Francisco Flores Pérez (former), Ricardo Maduro, George W. Bush, Abel Pacheco (former), Enrique Bolaños and Alfonso Portillo (former) The Dominican Republic–Central America Free Trade Agreement, commonly called DR-CAFTA (pronounced Doctor Cafta), is a free trade agreement (legally a treaty under international law, but not under... This article does not cite any references or sources. ... A patent is a set of exclusive rights granted by a government to an inventor or applicant for a limited amount of time (normally maximum 20 years from the filing date, depending on extension). ... Pharmacology (in Greek: pharmacon is drug, and logos is science) is the study of how chemical substances interfere with living systems. ...

References

1. ^ Emphasis added to Cobden's quotation of the petition, in a free-trade speech delivered in 1846, the full text of which is available at “Free Trade With All Nations.”
2. ^ Quotation from page 103 of James Goldsmith's The Trap, 1994, Macmillan ISBN 0-333-64224-4 (summarized in Art Hilgart' review). Goldsmith had a background in corporate takeovers, but breaking up conglomerates within nations would still be permissible in his model, so long as no part of the conglomerate exported outside its area of production. His concern for the harm done to rural societies by the effects of free trade is summarized on page 103 with the sentence: "The cost of such social breakdown can never be measured. The damage is too fundamental."

Year 1994 (MCMXCIV) was a common year starting on Saturday (link will display full 1994 Gregorian calendar). ... James Goldsmith as he appeared in his Referendum Party’s mass-mailed video tape, March 1997. ... A takeover in business refers to one company (the acquirer) purchasing another (the target). ...

See also

• Ravi Batra
• Lou Dobbs
• Protectionism
• Offshoring
• Paul Craig Roberts

Ravi Batra is a U.S. economist and professor at Southern Methodist University in Dallas, Texas. ... Lou Dobbs (born September 24, 1945) is an economist, the anchor and managing editor of CNNs Lou Dobbs Tonight, an editorial columnist, and host of a syndicated radio show. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... Offshoring describes the relocation of business processes from one country to another. ... Paul Craig Roberts Paul Craig Roberts is an economist and a nationally syndicated columnist for Creators Syndicate. ...

External links

• See the link list under Free Trade