There can be no question that fostering international commerce has led to a greater prosperity for countries across the globe. Limits on that trade place a chokehold on that prosperity, whereas free trade helps to encourage it. Agreements that protect free trade help to open up new markets, create better jobs, increase investment globally, spread goods and services and encourage open discussion of ideas. Here are a few of the advantages you will see between countries with Free Trade Agreements.
Increases in Production
Free trade encourages companies and regions to focus on creating the goods or services that they are best at producing, which in turn increases their ability to produce. It also creates more demand for the products and services produced, which encourages companies to increase the size of their production space, the number of workers and their overall output.
Free trade helps economies to grow by giving an increase in market share and sales to companies and regions that are willing to take the risks associated. Larger countries like the United States see significant economic improvement when they participate in free trade, and that growth inevitably improves the economies of smaller countries that are open to trade.
Free trade agreements force countries and companies to comply with all terms and laws that have been agreed upon. Should a country choose to operate contrary to those agreements, they will ultimately lose business and investors because they will be seen as a larger risk than those which do comply with agreement terms.
Improved Global Resource Allocation
Resources are not evenly distributed even within a single country, much less across the globe. Free trade agreements help to encourage the distribution and allocation of global resources through trade. Countries are able to export their excess products and import the resources they need. Imports typically will suppress inflation because each product will inevitably come from the very best source.
Strong Business Incentives
Free trade agreements open up the market and provide businesses with strong incentives as well as protections. The agreements typically will include commitments to protect intellectual property rights, open regions to free competition and protect labor rights. They help to maintain or improve environmental standards and facilitate the speed and accuracy of customs procedures. Exporters in a free trade agreement typically improve their technologies and create better jobs in order to compete better within the market.