Sample Essay
McConnel and Brue define free trade as “the absence of artificial (government imposed) barriers to trade among individuals and firms in different nations”. Free trade has long been thought as the desirable model of trade that brings about prosperity to nations practicing it. However, I beg to differ and believe that free trade does not materialize its theoretical promises. Critical analysis of free trade theory reveals that free trade is anything but fair trade.
I have attempted to analyze the classical and neoclassical models of free trade theory and identify inherent problems within the very concept of free trade. Careful analysis reveals that when applied to the contemporary world economy, the very postulates of these theories favor developed countries over the developing countries.
David Ricardo has showed that relative cost difference is an important determinant of the theory of international trade. He founded the principle of comparative advantage, which suggests that under competitive forces, countries will ultimately produce goods, which provide them comparative advantage in terms of cost. This serves as the classical approach towards free trade and implies that countries should specialize in producing those commodities in which they possess a relative cost advantage. They will be more productive in making these goods and can trade them for other goods in which they do not possess a comparative advantage.
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