Business Economics Essay Example | Topics and Well Written Essays - 2000 words

Business Economics - Essay ExampleIn the mid-1960s, the international economy was prone to step away from protectionism and support more efficient liberalisation meanwhile during the next decade, quite an opposite tendency took place and various countries started to shut off from one another with the help of tariff and oddly non-tariff barriers in order to secure their own inner market from foreign competition. Todays conditions of tough competition stimulate governmental representatives to take the apparent movement of the states foreign- frugal activity and its forms more seriously, making the right choice between two different policies that are able to exert influence on every area of governments life. Advantages of Free International Trade The liberalisation of international economic relationships necessitates the transition to open economy having an antimonopoly character. As a rule, a lot of states are interested simultaneously in both liberalisation and protectionism. The t heoretic justification of free trade policy, which is considered to be bankable for all states and nations, was formed by Adam Smith, Davis Ricardo, Francois Quesnay and others (Dunkley 2004). The movement of free trade proponents was founded in the last quarter of the 18th century in England, and it was connected with the industrial revolution. The position of English free traders was directed against agrarian duties, which supported high prices for farm commodities in the interest of large landowners (Schumacher 2012). In this respect, under the influence of customs reform, the free trade policy completely won in Great Britain in the mid-19th century and later on, the tendency and idea of free markets spread in France, Germany and Russia (Irwin 2009). In the 20th century, the normals of liberalisation were put into practice based on the performance of international organisations and regional economic unions. The policy of free trade supposes nominal governmental interference i n foreign trade, which develops on a basis of free market forces of demand and supply. The main methods of free trade are dumping, which representation sales of products at artificially decreased prices, and non-tariff ways of regulation, which include reviewing and standardisation. The advantages of free trade are multifaceted and have been proved with theoretical aspects as swell as practical results. First of all, free trade allows improving prosperity of trading nations because it opens opportunities for international specialisation of production and exchange based on the principle of comparative advantages. The gains of international trade can be measured with the difference between profits received in the conditions of international exchange and financial results obtained with the lose of foreign trade or, as Marshall suggested, comparative analysis of producers and consumers profit levels may also evaluate benefits of free trade policy. Secondly, such foreign economic atti tude mitigates the development of competition and stimulates innovations. Finally, all these consequences contribute to the improvement of product quality, which is a positive aspect for potential consumers.