The Fruits of Free Trade

The global market is under the mercy of trade liberalization- a phenomenon that is brought by the globalization. Liberalism was borne out of the economic disorientations of the mercantilist system. In this type of system, a country (European power) had to expand overseas in order to establish colonies. The colonies would serve as sources of raw materials (for production) as well as items of trade for the “mother” country.

The colonies were not allowed to trade with countries other than the “mother” country. The “mother” country, though, could establish trade relations with other countries. The products from the colonies would be sent to the “mother” country and sold in the European market. In this system, the mother country could preserve its comparative advantage with other countries. The father of modern economics- Adam Smith in the wealth of the nations revealed free trade as one of the keys in accumulating wealth.

According to him, the economy should be left open, laissez-faire. Indeed, a country needs to be self-sufficient but a country also needs other nation to step forward, to attain progress and especially to enjoy a high standard of living. A country will remain at its condition if it only promotes self-sufficiency. The economic freedom enables a country to develop sustainably. It is liberalism.

fundamental assertions of liberalism are: central concern on individual freedoms, the role of the state is to protect individual rights and freedom from others, and the state should be the servant of the collective will and hence could be done by establishing democratic institutions. Liberalism does not explain the nature of war and peace though it is influential in explaining the nature of political economy especially those that concern the relationship of consumers and firms, government and firms, competition and restraint, and optimization and underutilization of resources – the goal is efficiency and cost-effectiveness.

The economic recession experienced by the United States in the eve of the 2nd millennium forced them to adopt new measures and change their behavior for the purpose of economic productivity. Yes, it may worn their liberty and efficiency, nonetheless, their decision to adhere with the free trade leads them to change for better. In fact, over the past 30 years, the exports and imports of US have increased from 11 percent to 30 percent, almost two-fold. Financial transactions internationally have also increased rapidly.