What Are The Disadvantages Of Free Trade?
It isn't always difficult to get caught up in an argument regarding the advantages and disadvantages of free trade. Free trade can often be a political hot button. Not only can it be a sometimes contentious issue between countries, but within a country as well.
The primary argument for free trade is that it keeps the government out of the arena, and allows goods and services to be exchanged between countries without interference by governments in the form of subsidies, tariffs, taxes, restrictive legislation, and so on. Where many see disadvantages of free trade often has not so much to do with the concept of free trade, but its implementation. Free trade would likely be fine in a perfect world, but in our imperfect world, its implementation brings about both positive and negative results.
When Things Go Wrong - Where do some see the disadvantages of free trade manifesting themselves? We often view tariffs, which raise the price of imports, as a bad thing, when one of our trading partners does it, making it harder for us to export certain goods. On the other hand, when we raise tariffs, it is usually done for protection of our own industries. If there are no tariffs, or other restrictions on the flow of goods, everyone could shop for the lowest price. If a foreign country can produce an automobile at 2/3 the cost of what the US can, and the automobiles are comparable in quality, we'll buy the foreign brand. Eventually US auto makers will have to cut back on employment, or on wages, or both. Here is a case where free trade can hurt a company or an entire industry.
The disadvantages of free trade can be mitigated if overall the trade between two countries is favorable to each, but this can sometimes be hard to accomplish. Each country has to have the right demand for goods and services produced by the other, and the demands of both countries, in dollar amounts, need to be somewhat equal. When free trade results in an imbalance of goods traded, someone suffers.
Free trade is often seen as placing new industries under too much pressure from international competition, and the same being the case with established industries that have become inefficient and whose goods have become too costly because of these inefficiencies plus high wages. Developing countries sometimes fear being overwhelmed by their more prosperous trading partners and seeing their culture, and to a degree their very independence, threatened as a result.
The European Union As A Case Study - The formation of the European Union makes an excellent case study in examining the advantages and disadvantages of free trade. Here you have a mix of cultures and economies, not to mention languages, each of which makes any kind of a sweeping free trade agreement impractical if not impossible. Trying to impose the same rules on all of the European economies would normally be a recipe for disaster. What the European countries have done, is to take things a step at a time, sometimes two steps forward and one step back, in what is viewed by some as a maddeningly slow process. Yet, as the use of a common currency grows, and tariffs and subsidies slowly disappear, free trade in this area seems to be working.
The Law Of Unintended Consequences - There will always be both adherents and opponents of free trade theory, mostly involving economists, financiers, and politicians. As far as the worker is concerned, the disadvantages of free trade are most often seen or felt in its sometimes flawed implementation. Agreements on paper, especially sweeping agreements, often lead to any number of unintended consequences.