There have always been misunderstandings in trade policy; people are most interested in the following direction. Why are those states that have vast resources poorer before our eyes, and others that have only human resources are rich and, moreover, quickly. This issue is one of the most difficult, but at the same time, interesting problems in the international economy. Within the economy, research areas have formed - protectionism and free trade . A free-trade advocate argues that the market should shape the structure of imports and exports . And advocates of protectionism believe that the state should protect domestic producers from the interference of foreign competition.
Free trade is a principle that provides for the exchange of goods and services between countries, freed to the maximum extent from customs duties, tariff and non-tariff barriers. The international economy, although it can achieve the efficient allocation of its resources, a high level of its material condition precisely due to free trade. But, nevertheless, free trade is faced with a huge number of problems:
- it is necessary to provide defense. Although this direction relates more to military-political life, this argument must also be fulfilled from the economic side. In this case, industries related to national defense are supported by the government. And this, in turn, is the main reason for protecting some domestic industries. This phenomenon entails great economic and social costs, which fully justify the concept of the need to strengthen national security.
- it is necessary to increase domestic employment. As many advocates of protectionism say, with its introduction new jobs are created, while free trade can lead to unemployment. But, in fact, free trade only changes the type of employment, and does not lead to its reduction. But still free trade can lower the demand for goods of some domestic producers, and this leads to unemployment in industries. Resources are limited and those resources that are not fully used are still not left unattended. It is necessary to have a good tax and monetary policy.
- it is necessary to diversify for the sake of stable operation. Trade barriers may be necessary for diversification, which can protect the domestic economy from being influenced by political international events. Diversification also contributes to a decline in production outside the home country, and ensures stability within the country. But the economic costs are also inefficient and enormous.
- it is necessary to protect young industries that have not yet been able to reach an economic scale. In this case, protection against competition is proposed, which may come from other countries.
- It is necessary to use cheap foreign labor force. Many argue that protectionism can protect domestic workers and firms from competition, which comes from all sides, in which wages are much higher. If you do not take protective measures, then domestic workers may receive the same low level of wages as those workers who work in a less developed country.
In general, the term free trade implies several directions:
- improving the welfare of nations where international specialization of production is applied;
- improving product quality as a result of increased international competitiveness;
- optimization of the resource allocation process;
- promoting international concentration of output and production of goods.