Free Trade, Free Trade Agreements, Free Trade Zones

Free Trade

Free trade is the trade of goods, services, or intellectual property across national borders, substantially unencumbered by governmental policies. Free trade is driven by market forces: domestic buyers desiring to purchase foreign products or services and foreign sellers willing to sell to those domestic customers. Free trade emphasizes the limited role of government through restrictions on international trade such as tariffs and nontariff barriers.

Comparative Advantage

Free trade is related to international trade. International trade is based on what the economist David Ricardo originally called the “law of comparative advantage.” At its simplest, the law states that a country's wealth will be maximized if it produces only what it is best at producing and trades that output for all other goods and services. Economists derive what ...

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