What is free trade?

Free trade refers to a situation where there are no artificial barriers or restrictions imposed by governments on the exchange of goods and services between countries. This means that trade can occur freely across borders, allowing consumers and businesses to access goods and services from anywhere in the world without tariffs, quotas, or other trade barriers that could artificially inflate prices or limit choices.

The benefits of free trade include increased competition, which can lead to better prices and quality for consumers, as well as greater efficiency and innovation among producers. It allows countries to specialize in the production of goods and services where they have a comparative advantage, promoting overall economic growth and improving global resource allocation.

In contrast, other options involve concepts that restrict trade or focus on protectionist measures. Limiting imports and supporting domestic industries can lead to inefficiencies and higher prices for consumers, while policies that benefit only the exporting country do not consider the mutual benefits that arise from free trade exchanges. Subsidies for domestic products also conflict with the principles of free trade by artificially supporting certain sectors at the expense of an open and competitive marketplace.