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    Why eliminate trade restrictions and encourage free trade?

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    Why would a country eliminate trade restrictions and encourage free trade? Using the European Union as an example, identify key changes that took place to encourage free trade.

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    Why would a country eliminate trade restrictions and encourage free trade?

    Free trade enables countries to import and export without any artificial barriers. The government does not intervene or interfere with trade transactions between participating countries. In free trade there are no subsidies, taxes or tariffs that affect the demand and supply of goods. A country can eliminate existing trade restrictions due to the benefits gained from free trade.

    According to Froning (2000), free trade is beneficial as it leads to increased economic growth for a country and also for businesses. Free trade results in improved standards of living, higher economic growth, and improved real income. Froning (2000) provides the example of NAFTA which is a free trade agreement between the United States, Canada and Mexico whereby U.S trade increased by 86% from 1993 up to 1999.
    Another benefit derived from free trade is increased production especially in countries that have comparative advantage. Countries that specialize in the production of certain commodities can benefit ...

    Solution Summary

    The expert determines why you eliminate trade restrictions and encourage free trade.