Definition
Free-trade policies reduce barriers to imports and exports and allow production to follow comparative advantage.
Political Dictionary
Free Trade
Free trade is exchange across borders with relatively few tariffs or restrictions.
Why It Matters
They can lower prices and increase specialization, while also creating adjustment costs for some industries and workers.
How It Works
Governments negotiate agreements, reduce tariffs, and establish rules for cross-border commerce.
History
Free-trade ideas grew with classical economics and modern trade agreements.
Example
A trade agreement may eliminate duties on many products over time.
Common Misconceptions
- Free trade means no rules at all.
- Every worker benefits equally.
- Free trade eliminates trade deficits automatically.
Related Terms
- Tariff
- Protectionism
- Trade Deficit
- Imports
- Exports
Related Topics
See Also