1. Free Trade
Standard SSEIN2

2. Effects of Trade Barriers
Positive
protect domestic industries – reduces foreign competition – protects jobs
Increase government revenue – can reduce budget deficit
Negative
Fewer Choices and higher prices for consumers
Encourages other nations to impose trade barriers against the U.S., hurting American exporters

3. Argument For Free Trade
1. If all countries produced what they were best at – comparative advantage- and traded for the rest, everyone would benefit.
Production and GDP would increase for all countries. This would deliver the greatest goods to the greatest number of people.
This is a great theory (proposed by David Ricardo), but it doesn’t happen because countries put up trade barriers
If you are for free trade, you are against trade barriers. (You do not want them)

4. Arguments against free trade (Protectionism)
Protection of National Security – governments protect domestic industries that produce items such as military goods, airplanes, and oil – may be more efficient to trade for these goods, however, most nations want to maintain these items incase of war or embargoes.

5. Arguments against free trade, cont.
2. Protection of Infant Industries - Newer industries are not as efficient and need time to become established. Governments sometimes impose temporary tariffs to help newer industries compete and grow. When they become more efficient, the tariffs are removed

6. Arguments against Free Trade, Cont.
Protection of Jobs – Concern that American companies cannot compete with foreign companies without cutting wages, laying off workers, or “outsourcing” jobs to Mexico or India.
Concerns about protecting American jobs arose during debates about the adoption of NAFTA t0