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Article: Free Trade
- Article from:
- Dictionary of American History
- Author:
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FREE TRADE
FREE TRADE.
The economic rationale for free trade lies in the principle that if trade is free, certain goods and services can be obtained at lower cost abroad than if domestic substitutes are produced in their place. The concept has each country producing for export those goods in which production is relatively efficient, thereby financing the import of goods that would be inefficiently produced at home. This comparative advantage in production between nations is expected to shift over time with changes in such factors as resource endowments and rates of technological advance. Free trade is therefore thought to facilitate the optimal use of economic resources: each country ...