ss 1,2

prout.econ

Free Trade

December 17, 1994

Q: When should there be free trade and when should there be limits put on trade?

Regarding this question, it is a matter of economic development whether trade should be free or whether there should be protective measures. If the trade is free, then it will inspire economic integration between one area and another, and this may be very beneficial. But advantage can be taken of this policy which might encourage the development of large vested interests. There must be opportunity for each and every segment of society, each and every group of people to grow to their maximum development. None should be dominated by another. They should be allowed their independent development so that the people in one area must be able to develop themselves to the best of their capacity, and the people in another area, likewise, must have that opportunity.

Now, if trade between the two areas will enhance this development, then it is very good. But if the trade will suppress the development of any group of people, then the protectionist policies should be in place so that that group may also grow in their development. For example, let us say, in one country there is superior technological development and there is superior economic growth, but in another country there are masses of people who are very poor and will provide cheap labor to make products. Now, there is an inequity between the living standard between these two countries, and an inequity in the educational standard, the overall living standard of the people of those two nations. If there is free trade between them, that means those cheap products made in the one country may be purchased in the other without any hampering of trade policy.

Now, if there are very wealthy entrepreneurs from the technologically developed country who would take advantage of this situation, say they will house their company in the undeveloped country using the cheap labor to make all of the products and then they will sell those products to the wealthy people of their own land at a reduced price, therefore increasing their profits 100 fold because those products would be very costly to make in their own country. So what is the result? The people in the third world country, they are exploited; their poverty is exploited by a foreign dominating power. They become the slaves of these people who build their economy to an extent, but they give them minimum amount. And at the same time, the people of the developed country are also victimized, because they go without work. The work is being put elsewhere where the labor is cheap, the living standard is low, and the requirements of the worker is less. So the people of both countries are becoming exploited. This should not be propagated. This kind of economic exploitation must be curbed, and there should be regulation to curb it. The welfare of the people of both countries is compromised for the overall profit bearing motives of the entrepreneurs.

Like this, each situation must be analyzed, and the welfare of the people of the countries involved must be taken into consideration. Otherwise basic harm may come to both societies.