We live in an increasingly global society; ideas and items are constantly exchanged among countries from every part of the world. Global trade occurs on a daily basis, and consists of items, services, and capital flowing across international borders. In most countries, it plays a crucial role in the economy, and for good reason.
Free global trade is a concept that almost every economist endorses, regardless of their political ideology. Although there will be winners and losers in every trade agreement, free trade is most beneficial to society as a whole. It allows countries to focus on exporting items that they have a comparative advantage in producing. A country gains a comparative advantage in a market based on their opportunity cost of production. Since there are only so many materials and labor hours available to each country, no single country can have a comparative advantage in all items; they must determine the market or markets where their opportunity costs are the lowest. By focusing on their strengths, countries are more efficient and productive.
Global trade is part of our daily lives. It offers many benefits; countries are able to maximize profits and production by focusing on what they are good at, while citizens enjoy products and services that would be unavailable to them if they relied solely on domestic production.
Category: Business & Finance