Free trade

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A South Korean container ship approaching the Bay Bridge in San Francisco Bay.


Free trade is a market model in which trade in goods and services between or within countries flow unhindered by government-imposed restrictions. Restrictions to trade include taxes and other legislation, such as tariff and non-tariff trade barriers.

The theory is that any voluntary trade must benefit both parties, otherwise it would not be made. More precisely, for a trade to occur both parties must expect a benefit (ex ante.) Furthermore, the advantages of free trade according to classic economic theory are substantiated in Ricardo’s comparative advantage analysis, according with which free trade achieves maximum economic efficiency and overall productivity gains.

Free Trade can be contrasted with protectionism, which is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition.

Governments often call managed international trade agreements "free trade", and although this is not really free trade, such treaties may result in freer trade.

Free trade is a term in economics and government that includes:
  • trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or subsidies for producers)
  • trade in services without taxes or other trade barriers
  • The absence of trade-distorting policies (such as taxes, subsidies, regulations or laws) that give some firms, households or factors of production an advantage over others
  • Free access to markets
  • Free access to market information
  • Inability of firms to distort markets through government-imposed monopoly or oligopoly power
  • The free movement of labor between and within countries
  • The free movement of capital between and within countries
''For more detailed arguments in favor of and against free trade, see: Free trade debate.
Trade Series
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International trade
History of international trade
Free trade
Protectionism
Trade pact
Trade bloc
Preferential trading area
Free trade area
Customs union
Trade creation
Trade diversion
Monetary union
Common market
Economic and monetary union

History of free trade

The history of international free trade is a history of international trade focusing on the development of open markets. It is known that various prosperous world cultures throughout history have engaged in trade. Based on this, theoretical rationalizations as to why a policy of free trade would be beneficial to nations developed over time. These theories were developed in its academic modern sense from the commercial culture of England, and more broadly Europe, over the past five centuries. Before the appearance of Free Trade, and continuing in opposition to it to this day, the policy of mercantilism had developed in Europe in the 1500s. Early economists opposed to mercantilism were David Ricardo and Adam Smith.

Economists that advocated free trade believed trade was the reason why certain cultures prospered economically. Adam Smith, for example, pointed to increased trading as being the reason for the flourishing of not just Mediterranean cultures such as Egypt, Greece, and Rome, but also of Bengal (East India) and China. The great prosperity of the Netherlands after throwing off Spanish Imperial rule, and declaring Free Trade and Freedom of thought, made the Free Trade/Mercantilist dispute the most important question in economics for centuries. Free trade policies have battled with mercantilist, protectionist, isolationist, communist, and other policies over the centuries.

Wars, such as the Pelopponesian War between Athens and Sparta, the Opium Wars between China and Great Britain, and other colonial wars, have been fought over trade. All developed countries have used protectionism at some time, due to special interest pressure or, prior to the 19th century, a belief in mercantilism, but usually reduced it as they gained more wealth .

American opposition to free trade

Beginning with 1st U.S. Secretary of the Treasury Alexander Hamilton's "Report on Manufactures", in which he advocated tariffs to help protect infant industries, including bounties (subsidies) derived in part from those tariffs, the United States was the leading nation opposed to "free trade" theory. Throughout the 19th century, leading statesmen of U.S. including Senator Henry Clay continued Hamilton's themes within the Whig Party under the name "American System." The opposition Democratic Party contested several elections throughout the 1830's, 1840s, and 1850's in part over the issue of the tariff and protection of industry. The Democratic Party favored moderate tariffs and the Whig's favored higher protective tariffs which won the elections of 1840 and 1848 respectively. The leading economist in the United States at this time Henry Charles Carey became the leading proponent of the "American System" of economics as it had developed in opposition to the 'free trade' system which he called the "British System" as was proposed by Adam Smith and advocated by the British Empire. His book "Harmony of Interests" together with German-American economist Friedrich List in his scholarly work became widely read and disseminated in America and Germany leading the German Historic School economists to embrace a similar anti-free trade approach which was embraced by Chancellor Bismarck in the late 1800s. The fledgling Republican Party led by Abraham Lincoln who called himself a "Henry Clay tariff Whig" strongly opposed free trade when formed and implemented at 44 percent tariff during the Civil War in part to pay for the building of the Union-Pacific Railroad, the war effort, and to protect American industry.[1] President William McKinley stated the United States' stance under the Republican Party (who had won every election for President except the two non-consecutive terms of Grover Cleveland until 1912 maintaining Lincoln's economic principles) as thus:
"Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. [It is said] that protection is immoral…. Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefitting mankind everywhere. Well, they say, ‘Buy where you can buy the cheapest'…. Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: ‘Buy where you can pay the easiest.' And that spot of earth is where labor wins its highest rewards."[2]


The tariff and support of protection to support the growth of infrastructure and industrialization of the nation became a leading tenet of the Republican Party thereafter until the Eisenhower administration and the onset of the Cold War.

In the 1930s, the US adopted the protectionist Hawley-Smoot Tariff Act which raise rates to all time highs beyond the Lincoln levels, which some economists believe exacerbated the Great Depression while others disagree. In response the Democratic Party under Franklin D. Roosevelt resorted to Hamilton's earlier formula of Reciprocity with moderate tariffs coupled with subsidy to industry which went unbroken until the 1970s when the Free Trade era began for the United States after the Kennedy Round of trade talks in the late sixties were complete.

Present day (US based)

Since the end of WWII, in part due to industrial supremacy and the onset of the Cold War, the US government has become one of the most consistent proponents of reduced tariff barriers and free 'managed' trade, having helped establish the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO); although it had rejected an earlier version in the 1950s (International Trade Organization or ITO). Since the 1970s US government has negotiated numerous managed trade agreements, such as the North American Free Trade Agreement (NAFTA) in the 1990s, the Dominican Republic-Central America Free Trade Agreement (CAFTA) in 2006, and a number of bilateral agreements (such as with Jordan).

At the same time, the US government has consistently opposed free trade in agricultural goods, subsidizing exports to the point where foreign producers (often in developing countries) are unable to compete. It has also repeatedly failed to comply with the rulings of international trade tribunals (e.g. Canada US softwood lumber dispute). The US government has also made copyright and intellectual property legislation part of its free trade agreements.

Economics of free trade

The literature analysing the economics of free trade is extremely rich with extensive work having been done on the theoretical and empirical effects. Though it creates winners and losers, the broad consensus among members of the economics profession in the U.S. is that free trade is a large and unambiguous net gain for society.[3] [4] In a 2006 survey of American economists (83 responders), "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries."[5] Quoting Harvard economics professor Gregory Mankiw, "Few propositions command as much consensus among professional economists as that open world trade increases economic growth and raises living standards."[6] Nonetheless, quoting Prof. Peter Soderbaum of Malardalen University, Sweden, "This neoclassical trade theory focuses on one dimension, i.e., the price at which a commodity can be delivered and is extremely narrow in cutting off a large number of other considerations about impacts on employment in different parts of the world, about environmental impacts and on culture." [7] Two simple ways to understand the benefits of free trade are through David Ricardo's theory of comparative advantage and by analyzing the impact of a tariff or import quota.

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The pink regions are the net loss to society caused by the existence of the tariff.
A simple economic analysis using the law of supply and demand and the economic effects of a tax can be used to show the theoretical benefits of free trade.[8]

The chart at the right analyzes the effect of the imposition of an import tariff on some imaginary good. Prior to the tariff, the price of the good in the world market (and hence in the domestic market) is Pworld. The tariff increases the domestic price to Ptariff. The higher price causes domestic production to increase from QS1 to QS2 and causes domestic consumption to decline from QC1 to QC2. This has three main effects on societal welfare. Consumers are made worse off because the consumer surplus (green region) becomes smaller. Producers are better off because the producer surplus (yellow region) is made larger. The government also has additional tax revenue (blue region). However, the loss to consumers is greater than the gains by producers and the government. The magnitude of this societal loss is shown by the two pink triangles. Removing the tariff and having free trade would be a net gain for society. [9][10]

An almost identical analysis of this tariff from the perspective of a net producing country yields parallel results. From that country's perspective, the tariff leaves producers worse off and consumers better off, but the net loss to producers is larger than the benefit to consumers (there is no tax revenue in this case because the country being analyzed is not collecting the tariff). Under similar analysis, export tariffs, import quotas, and export quotas all yield nearly identical results. Sometimes consumers are better off and producers worse off, and sometimes consumers are worse off and producers are better off, but the imposition of trade restrictions causes a net loss to society because the losses from trade restrictions are larger than the gains from trade restrictions. Free trade creates winners and losers, but theory and empirical evidence show that the size of the winnings from free trade are larger than the losses. [8]

Trade diversion

According to mainstream economic theory, global free trade is a net benefit to society, but the selective application of free trade agreements to some countries and tariffs on others can sometimes lead to economic inefficiency through the process of trade diversion. It is economically efficient for a good to be produced by the country which is the lowest cost producer, but this will not always take place if a high cost producer has a free trade agreement while the low cost producer faces a high tariff. Applying free trade to the high cost producer (and not the low cost producer as well) can lead to trade diversion and a net economic loss. This is why many economists place such high importance on negotiations for global tariff reductions, such as the Doha Round.[8]

Opponents of free trade

Free trade is often opposed by domestic industries that would have their profits and market share reduced by lower prices for imported goods (see Dumping). For example, if United States tariffs on imported sugar were reduced, US sugar producers would receive lower prices and profits, while US sugar consumers would spend less for the same amount of sugar because of those same lower prices. Economics says that consumers would necessarily gain more than producers would lose. However, domestic sugar producers have large financial incentives to politically oppose the lifting of tariffs. More generally, producers often favor domestic subsidies and tariffs on imports in their home countries, while objecting to subsidies and tariffs in their export markets.

Some socialists oppose free trade as a consequence of their exploitation theory and opposition to employment ("wage slavery"). E.g. Karl Marx wrote in The Communist Manifesto, "The bourgeoisie...has set up that single, unconscionable freedom -- Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation."

Others oppose government managed trade, erroneously calling it free trade. Thus, "free trade" is opposed by many anti-globalization groups, based on the observation that so-called Free Trade agreements generally do not increase the economic freedom of the poor, and frequently make them poorer. See perfect competition for the basis for this view of how Free Trade should work. For example, it is argued [13] that letting subsidized corn from the US into Mexico freely under NAFTA at prices well below production cost (dumping) is ruinous to Mexican farmers who then enter the US illegally.. Of course, such subsidies violate free trade, so this argument might better be seen as against subsides and for free trade, properly understood.

Some free-trade economists have recently begun to express their own doubts concerning the concept and practice of free-trade. Alan S. Blinder, for example, a professor of economics at Princeton University, and former Federal Reserve Board vice chairman and advisor to Democratic presidential candidates, had previously argued, along with most economists, that free trade enriches the U.S. and its trading partners. However, he now says new communication technology will put 30-40 million American jobs at risk in 10-20 years. Blinder has not completely rejected free trade or Ricardo's ideas about comparative advantage, but he advocates greater protection for displaced workers and an improved education system. Blinder opposed steel, aluminum and farming export subsidies and protection, and pushed for the passage of NAFTA, though he did not agree that it would create jobs in the US. Trade changes types of jobs, not the number, he said. Technology allowed Indians in call centers to do the work of Americans at lower wages. "Tens of millions of additional American workers will start to experience an element of job insecurity that has heretofore been reserved for manufacturing workers," said Blinder. Democrats and Republicans are becoming skeptical. The debate is, "Should government encourage forces of globalization or try to restrain them?" Latin America performed poorly since tariff cuts in 1980s and 1990s, compared to protectionist China and Southeast Asia. Paul Samuelson, in his 2004 essay[14], condemned "economists' over-simple complacencies about globalization" and said that workers don't always win. Lawrence Summers, advocate for trade expansion as Clinton Treasury Secretary, said retraining is "pretty thin gruel" to the middle class. Ralph Gomory, former IBM chief scientist, says the rise of China and India could make the U.S. lose important industries. Harvard economist Dani Rodrik says trade barriers should help poor nations build domestic industries and give rich nations time to retrain workers. But Jagdish N. Bhagwati says jobs will grow in medicine, law and accounting. Blinder created a list of "Highly offshorable" jobs that could be lost in the next 20 years, for example, 1,815,340. bookkeeping, accounting and auditing clerks. [15]

Ecuadorian President Rafael Correa has denounced the "sophistry of Free Trade," in an introduction he wrote for a book titled The Hidden Face of Free Trade Accords. One of the authors of that book is today Correa's Energy Minister, Alberto Acosta. Citing as his source the book, Kicking Away the Ladder, [1] written by a Korean economist based at Cambridge University, Ha-Joon Chang, Correa identified the difference between an "American system" opposed to "a British System" of free trade. The latter, he says, was explicitly viewed by the Americans as "part of the British imperialist system." Correa wrote that Chang showed that it was Treasury Secretary Alexander Hamilton, and not Friedrich List who was the first to present a systematic argument defending industrial protectionism. (Correa includes List's National System of Political Economy in his bibliographic references.)

Alternatives to free trade

Fair Trade

Main article: Fair Trade
Fair trade is an organized social movement which promotes standards for international labor, environmentalism, and social policy in areas related to production of Fairtrade labeled and unlabeled goods.

Tobin Tax

Main article: Tobin tax
A Tobin tax is the suggested tax on all trade of currency across borders. This is intended to put a penalty on short-term speculation in currencies. This policy is an alternative to the free flow of capital across borders. This policy has little or nothing to do with the free flow of goods and services.

Protectionism

Main article: Protectionism
Protectionism is the economic and political policy of isolating a country's economy through the imposition of tariffs, quotas, restrictions, border security, and other measures. Supporters of protectionism affirm that it prevents the distortion of the fragile wage and price structure by foreign dumping, unfair trade with undeveloped nations, labor arbitrage, illegal immigration, and other foreign interference in the domestic market.

Protectionism was a key tenet of Alexander Hamilton's economic program, which sought to protect the domestic economic system and wage and price structure from foreign competition. Some pro-administration newspapers called the Tariff Act of 1789, signed into law by President Washington on July 4 1789, the "second declaration of independence."

Balanced trade

Main article: Balanced trade
Balanced trade is an alternative economic model to free trade. Under balanced trade, nations are required to provide a fairly even reciprocal trade pattern. They cannot run large trade deficits. If deficits appear, the surplus nation must find a way to balance out trade or risk sanctions, fees, or quotas. Critics say this may discourage innovation as one country may reduce its efforts to produce products needed by the other.

International barter

Some nations have prohibited trade under monetary terms of trade. For example, Hjalmar Schacht arranged barter for Nazi Germany to bypass the free market which he thought was rigged by Anglo-American capitalists.[16] The former Soviet Union occasionally arranged bilateral barter within its sphere of influence. See Comprehensive Program for Socialist Economic Integration or Comecon. Arab League nations have also occasionally replaced monetary trade with barter.

Increase the credit risk to international loans

George Soros and others argue that some of the most destructive free trade, such as developing world agricultural monoculture, is driven by export-oriented production targets set by the International Monetary Fund (IMF) and the governments it supports. He suggests that the volume of this trade would be lower if the lending banks were liable for credit default instead of receiving IMF bail-outs. If banks were responsible for default, the levels of lending would be lower and lead to more sustainable export programs due to the discipline of the free market, he believes.

International price floors

Some argue that free trade is responsible for the decline in international commodity prices. One reason for these low prices is the over-production of subsidized commodities in the developed world. Rather than removing the production subsidy for farmers in the rich world some suggest extending them to farmers in the developing world. For instance, producers in Poland lobbied to be included in the Common Agriculture Policy. The reason that rich-country farmers need subsidies to thrive is the comparative advantage of cheap land and labour enjoyed by their poor-country competitors.

Separating world prices from domestic prices

Foreign trade of Communist Czechoslovakia was conducted at "free trade" import prices, with the Ministry of Foreign Trade selling the goods on, into the internal market, at pre-determined prices for each good. In this way, Czechoslovakian consumers were insulated from shifts in world prices whilst having some access to foreign products.

It is difficult for governments to sustain different internal prices over the long term. If the internal price is set below world prices, smugglers try to profit from the differential by illegally exporting the product to nations where they can sell it at a higher price. To the extent smugglers succeed, the domestic government is indirectly subsidizing foreign consumers. This problem has been vividly illustrated in nations where fuel prices are subsidized below world prices; domestic shortages frequently occur as a significant portion of the good is illegally smuggled out of the country. Rationing and black markets are stimulated by artificially low prices; in Iraq the famously long petrol pump queues for petrol at 50 dinars]/litre] can be bypassed by buying on the black market at 250 dinars/litre. Unofficial markets are a common problem wherever the "official" price is below (or above) the free trade price.[17]

Despite the difficulties of maintaining fixed commodity prices, many Governments that attempt it claim that doing so "immunizes" their economies against destabilizing price shocks. It is sometimes argued that the social and economic benefits alone, outweigh the disadvantages (of import-price stability).

On the other hand, international prices tell the costs of producing certain products and the benefits of consuming them. By separating the prices this flow of information is halted and therefore the local decisions are decoupled from the global needs and possibilities, thus hindering the producers in the country to produce the products where they have a comparative advantage and the consumers to consume the products that can elsewhere be produced so cheaply that they would like to consume them at those prices instead of consuming some other kind of products or less products (or services).

Regional trading blocs

James Goldsmith advocated free trade within regional trading blocs, but not between blocs (such as European Community countries). If countries within the "customs union" had similar living standards and norms of social and environmental policy they would not race to the bottom. He also proposed protectionism in the goods market, whilst allowing free trade in technology and capital.

Miscellaneous

The relative costs, benefits and beneficiaries of free trade are debated by academics, governments and interest groups. While the academic debate is essentially settled in favor of free trade, a number of arguments for and against in the ongoing public debate can be seen in the free trade debate article.

Depending on the specific context, use of the term free trade can signify one or more of the above conditions. However, it is fundamental that only governments can restrict trade: they have the legal monopoly over the use of physical force to influence trade in a geographical area.

The term free trade has become very politically based, and it is not uncommon for so-called "free trade agreements" to impose additional trade restrictions. Such restrictions on trade are often due to domestic political pressure by powerful corporate, environmental or labor interest groups seeking special protections of their perceived interests.

Free trade agreements are a key element of customs unions and free trade areas. The details and differences of these agreements are covered in their respective articles.

See also

Concepts/topics Trade organizations Other lists Criticism Conservative Opposition to Free Trade

Footnotes

1. ^ [2] Lind, Michael. New America Foundation.
2. ^ William McKinley speech, Oct. 4, 1892 in Boston, MA William McKinley Papers (Library of Congress)
3. ^ Fuller, Dan; Geide-Stevenson (Fall 2003). "Consensus Among Economists: Revisited". Journal of Economic Review 34 (4): 369-387. 
4. ^ Friedman, Milton. "The Case for Free Trade". Hoover Digest 1997 No. 4. 
5. ^ Whaples, Robert (2006). "Do Economists Agree on Anything? Yes!". The Economists' Voice 3 (9). 
6. ^ Mankiw, Gregory (May 7, 2006). Outsourcing Redux. Retrieved on January 22, 2007.
7. ^ Post-Autistic Economics Review, Sept 2007
8. ^ Steven E. Landsburg "Price Theory and Applications" Sixth Edition Chapter 8
9. ^ ALan C. Stockamn "Introduction to Economics" Second Edition Chapter 9
10. ^ N. Gregory Mankiw "Macroeconomics" Fifth Edition Chapter 7
11. ^ Steven E. Landsburg "Price Theory and Applications" Sixth Edition Chapter 8
12. ^ Steven E. Landsburg "Price Theory and Applications" Sixth Edition Chapter 8
13. ^ Institute for Agricultural and Trade Policy NAFTA Truth and Consequences: Corn
14. ^ Journal of Economic Perspectives, 18(3):135-46, Summer 2004, Where Ricardo and Mill rebut and confirm arguments of mainstream economists supporting globalization, Paul A. Samuelson. Mainstream economists have argued for globalization. Good jobs may be lost here in the short run, they say, but the total U.S. net national product must, by the economic laws of comparative advantage, be raised in the long run. The gains of the winners exceed the losses of the losers. Schumpeter called this "creative capitalist destruction." But Samuelson says it is wrong to assume a necessary surplus of winnings over losings. This paper asks, "Will inventions A or B lower or raise the new market-clearing real wage rates that sustain high-to-full employment" in China and America?
15. ^ Job prospects: Pain from free trade spurs second thoughts; Mr. Blinder's shift spotlights warnings of deeper downside, David Wessel and Bob Davis. Wall Street Journal, 28 Mar 2007, p. A1
16. ^ Officially, the 1933 bilateral-barter policy was designed to ensure that foreign countries bought as much from industrial Germany as she bought from them. However, Milton Friedman has argued ([3]) that Hjalmar Schacht's exchange controls were primarily designed to restrict capital flight.
17. ^ See The Economist’s review of fuel subsidy's effects The Economist online.

External links

market is a social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services. It is one of the two key institutions that organize trade, along with the right to own property.
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Legislation (or "statutory law") is law which has been promulgated (or "enacted") by a legislature or other governing body. The term may refer to a single law, or the collective body of enacted law, while "statute" is also used to refer to a single law.
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Non-tariff barriers to trade are trade barriers that restrict imports but are not in the usual form of a tariff.

They are criticized as a means to evade free trade rules such as those of the World Trade Organization (WTO), the European Union (EU), or North American Free
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David Ricardo (18 April, 1772–11 September, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith.
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In economics, David Ricardo is credited for the principle of comparative advantage to explain how it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good.
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Protectionism is the economic policy of restraining trade between nations, through methods such as tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic
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Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold).
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government is a body that has the power to make and the authority to enforce rules and laws within a civil, corporate, religious, academic, or other organization or group.[1]
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A good or commodity in economics is any object or service that increases utility, directly or indirectly, not to be confused with good in a moral or ethical sense (see Utilitarianism and consequentialist ethical theory).
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A trade barrier is a general term that describes any government policy or regulation that restricts international trade. The barriers can take many forms, including:
  • Import duties
  • Import licenses
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In economics, factors of production are resources used in the production of goods and services, including land, labor, and capital.

Land, labor, and capital

Resource in economics distinguish among such factors of production as:

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labour (or labor) is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have created a concept called human capital (referring to the skills that workers possess, not
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In economics, capital or capital goods or real capital refers to already-produced durable goods available for use as a factor of production. Steam shovels (equipment) and office buildings (structures) are examples.
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Free trade is one of the most debated topics of the 20th and 21st century. Different arguments are used by those who favour and by those who oppose free trade, or feel that more constraints are needed. These arguments can be divided in economic, moral and sociopolitical arguments.
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International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic,
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history of international trade chronicles notable events that have affected the trade between various countries.

In the era before the rise of the nation state, the term 'international' trade cannot be literally applied, but simply means trade over long distances; the sort
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Protectionism is the economic policy of restraining trade between nations, through methods such as tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic
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Economic policy
Monetary policy
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Spending   Deficit   Debt
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Financial market
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trade bloc is a large free trade area formed by one or more tax, tariff and trade agreements. Typically trade pacts that define such a bloc specify formal adjudication bodies, e.g. NAFTA trade panels.
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Preferential Trade Area is a trading bloc which gives preferential access to certain products from certain countries. This is done by reducing tariffs, but does not abolish them completely.
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free trade area is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods between them.

It can be considered the second stage of economic integration.
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customs union is a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas. Common competition policy is also helpful to avoid competition deficiency.
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Trade creation is an economic term related to international economics in which trade is created by the formation of a customs union.


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Trade diversion is an economic term related to international economics in which trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement.
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monetary union is a situation where several countries have agreed to share a single currency (also known as a unitary or common currency) among them, for example, the East Caribbean dollar.
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economic and monetary union is a single market with a common currency. It is to be distinguished from a mere currency union (e.g. the Latin Monetary Union in the 1800s), which does not involve a single market.

This is the fifth stage of economic integration.
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history of international trade chronicles notable events that have affected the trade between various countries.

In the era before the rise of the nation state, the term 'international' trade cannot be literally applied, but simply means trade over long distances; the sort
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