free trade


free trade
free-trade, adj.
1. trade between countries, free from governmental restrictions or duties.
2. international trade free from protective duties and subject only to such tariffs as are needed for revenue.
3. the system, principles, or maintenance of such trade.
4. Chiefly Scot. smuggling.
[1600-10]

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Policy in which a government does not discriminate against imports or interfere with exports.

A free-trade policy does not necessarily imply that the government abandons all control and taxation of imports and exports, but rather that it refrains from actions specifically designed to hinder international trade, such as tariff barriers, currency restrictions, and import quotas. The theoretical case for free trade is based on Adam Smith's argument that the division of labour among countries leads to specialization, greater efficiency, and higher aggregate production. The way to foster such a division of labour, Smith believed, is to allow nations to make and sell whatever products can compete successfully in an international market.

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also called  laissez-faire 

      a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports). A free-trade policy does not necessarily imply, however, that a country abandons all control and taxation of imports and exports.

      The theoretical case for free trade is based on Adam Smith (Smith, Adam)'s argument that the division of labour (labour, division of) among countries leads to specialization, greater efficiency, and higher aggregate production. (See comparative advantage.) From the point of view of a single country there may be practical advantages in trade restriction, particularly if the country is the main buyer or seller of a commodity. In practice, however, the protection of local industries may prove advantageous only to a small minority of the population, and it could be disadvantageous to the rest.

      Since the mid-20th century, nations have increasingly reduced tariff barriers and currency restrictions on international trade. Other barriers, however, that may be equally effective in hindering trade include import quotas, taxes, and diverse means of subsidizing domestic industries.

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Universalium. 2010.

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