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1. Who are the winners and who are the losers from "free trade"?

1. Who are the winners and who are the losers from "free trade"?

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Answer #1

Winners of the free trade are the consumers.

  • A nation trade at the point where the world price is lower than the local price. At the lower world price, the consumer purchase more and they end up having more consumer surplus and increased saving after consuming more at a lower cost. The saved income can be spent on other items leading to a higher consumption level. Free trade supports the consumer.
  • The product having a comparative advantage will be exported and it will benefit the abundant resources in the economy by increasing the return on that factor.

Free trade will harm the producers who cannot compete at the world price and are inefficient and the free trade will also affect the scarce factor in the economy by reducing the return to that factor.

  

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