What Do You Think Are The Political Arguments For Free Trade

Week 5
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Institution
Week 5
Question 1
One political argument for free trade is that political commitment is beneficial for national welfare. Basically, political economists feel that free trade safeguards against discrimination and in this way, it promotes peace and stability for economic and political cooperation. Political supporters of free trade claim that tariffs result in a net loss to the economy because they destroy the economic incentives that both producers and consumers should be enjoying. In this way, free trade is embraced because it eliminates such destructions and leads to national welfare (Paul, 1993). Another political argument about free trade is that it encourages the spirit of competition. In this argument, protected markets restrict a country from gaining from external economies and prevents growth of industries. When a country is only competing internally, it limits production internationally and this reduces competition and raises profits that could lead some businesses or industries to become monopolies. The other political argument for free trade is that it gives producers and/or entrepreneurs an opportunity to learn. As they strive to find new ways of exporting and competition, a country allows its producers to become more innovative (Paul, 1993). This is opposed to protected trade where the government largely determines and directs on the patterns of import and exports.
However, these political arguments of free trade have not survived the test of time. Many of the gains of free trade have not been quantified/proven in any way. In fact, it is believed that the costs of destroying protected trade with tariffs, quotas, and export subsidies among others are larger than the cost-benefit analysis of free trade (Krugman, Obstfeld & Melitz, 2013).
Question 2
Even though their average income still remains low, China and India have recorded a remarkable economic growth over the past few decades. The Chinese economic reform was launched in 1978 and this set it from a closed, centralized economy to a market economy (Cetron & Davies, 2006). The removal of communal systems in the countryside, fiscal decentralization, and freedom of prices, independence of state companies, and the development of the private sector has enhanced China’s economic growth. Over the last decade, China’s financial market, modern banking system, opening of international business, and also the Direct Foreign Investments have pushed it to grow dramatically. By 2010, China was the largest exporter of essential goods such as underwear, magnetic tapes, and cigarettes. It passed Japan in gross internal production (PIL) and in 2015, it became the largest economy in the world (Cetron & Davies, 2006).
On its part, in the 1990s, India was mainly a “closed” economy because it did not import most of the goods. However, the government promoted economic liberation measures such as the deregulation of the industrial sector and state agencies were privatized. This saw the a dramatic change in India economy by the mid-1990s as its GDP per capita rose at an annual rate of 1.3 percent from 1960 to 1980. India also started participating in international trade and its economy began to grow. While ...