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Free trade disadvantages

Trade Associations
Paper and Paper Products
From Australia
To Egypt
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Jul 28, 2020
What are the disadvantages of free trade?

1 answer

Jul 30, 2020

Despite many advantages, free trade policy has never been completely adopted by all the countries of the world. Particularly after the World War II, the policy was abandoned even by those who had previously adopted it. The following arguments are given against free trade policy.

Unrealistic Policy: Free trade policy is based on the assumption of laissez-faire or government non-in­tervention. Its success also requires the pre-condition of perfect competition. However, such conditions are unrealistic and do not exist in the actual world.

Non-Cooperation of Countries: Free trade policy works smoothly if all the countries cooperate with each other and follow this policy. If some countries decide to gain more by imposing import restrictions, the system of free trade cannot work.

Economic Dependence: Free trade increases the economic dependence on other countries for certain essential products such as food, raw materials, etc. Such dependence proves harmful particularly during wartime.

Political Slavery: Free trade leads to economic dependence and economic dependence leads to political slavery. For political freedom, economic independence is necessary. This requires abandonment of free trade.

Unbalanced Development: Free trade and the resultant international specialization lead to unbalanced development of national economy. Under this system, only those sectors are developed in which the country has a comparative advantage. Other sectors remain undeveloped. This results in lop-sided development.

Dumping: Free trade may lead to cutthroat competition and dumping. Under dumping, goods arc sold at very cheap rates and even below their cost of production in order to capture the foreign markets.

Harmful Products: Under free trade, injurious and harmful products may be produced and traded. Trade restrictions are necessary to check the import of such products.

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