Effects of Free Trade on Globalization
Free trade is a simple concept that advocates for the freedom of every individual in buying and selling to whomever they wish to on terms that are mutually agreed upon. The concept further points out that the distance or geographical placement of the two parties should not be an issue in their trading activities. Whether they live next door or are thousands of miles apart, trade between them should not be hindered. In the ancient times, people mainly traded with those who lived in close proximity and the availability of goods produced in faraway lands was not very easy.
The concept of free trade began taking shape in most countries across the world with the development of steamships and railways about 200 years ago. These developments made traveling easier and even less costly to most traders who had an interest in exploring other markets. With modern engineering, the distance between various world markets has been significantly shortened making the world to become a global village that can today be traversed at will.
Free trade has enhanced the maximization of global economy. It has enabled various countries from various parts of the world to be able to participate in trading activities with each other on world markets. As a result of this, countries with weaker economies have been able to upgrade and acquire better rewards by through exploration of the best markets for their products. Free trade has been able to guarantee freedom to local firms and even individual traders from domestic tyranny since they are now able to source and find the best markets globally. The result of this liberalization is that quite a number of people across the globe have been able to break away from the yoke of poverty and dependence.
As much as free trade has offered people the freedom to trade across borders and on an international platform, it has also widened inequalities in income across the globe. The concept of free trade has heightened competition that has seen an influx of foreign firms into weaker economies, thus, phasing out domestic firms. The result of this unfair competition is that comparative advantages have been created, hence, destroying the benefits of free trade across the globe. This has led to high costs on local consumers.
It should be noted that even if the concept of free trade operates as expected, the reality is that it has created a problematic global financial architecture that represents division of labor, only favoring developed countries. Emerging economies on the other hand, have been only concentrated their efforts in the exportation of raw materials and low-quality goods. As a result of this kind of comparative advantage, there has been a case of high unemployment. Besides, several potentially efficient industries have been phased out and irresponsible exploitation of resources from emerging economies has also taken center stage. Free trade has led to a widening income disparity across several nations, causing an outrage against globalization. The greatest benefits of free trade have only been enjoyed by industrialized nations.