Free Trade

Free trade is a market model in which trade in goods and services between or within countries flow unhindered by government-imposed restrictions. Restrictions to trade include taxes and other legislation, such as tariff and non-tariff trade barriers. The theory is that any voluntary trade must benefit both parties, otherwise it would not be made. More precisely, for a trade to occur both parties must expect a benefit (ex ante.) Furthermore, the advantages of free trade according to classic economic theory are substantiated in Ricardo's comparative advantage analysis, according with which free trade achieves maximum economic efficiency and overall productivity gains. Free Trade can be contrasted with protectionism, which is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition. Free trade is a term in economics and government that includes: * trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or subsidies for producers) * trade in services without taxes or other trade barriers * The absence of trade-distorting policies (such as taxes, subsidies, regulations or laws) that give some firms, households or factors of production an advantage over others * Free access to markets * Free access to market information * Inability of firms to distort markets through government-imposed monopoly or oligopoly power * The free movement of labor between and within countries * The free movement of capital between and within countries