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Free Trade Vs Free Market

International Business

Submitted To:

Ma’am Khansa Masood
Submitted By:

Asad Raza +923336135474

 Be able to resolve problems that arise among the countries.  Free trade is an opportunity for the members’ countries to provide financial help to the other country by providing financial aid etc. 2|Page .Free Trade: Free Trade means that countries may freely trade goods with each other without having to pay a tariff (tax) on those goods.  Promote competition in the free trade areas.  Encourage cooperation among countries. In other words. Benefit of free trade:  Free trade increases sales and profits for the member’s countries and their economies.  Protect the property rights of people and businesses in each country. Purpose of free trade: The purpose of the agreement is to:  Allow free movement of goods and services among the countries. “free trade” means no trade barriers among the trading nations.  Lack of tariffs has allowed one country’ goods in the other countries market at lower price.

both parties will endeavor to eliminate tariffs on no less than 90% of products. specified goods shall become duty‐free effective January 1st of the third year through yearly reductions by Margins of Preference (MOP) as follows: 3|Page . For Phase‐ II.  Short term unemployment Free trade agreement between Pakistan & China: Pakistan and China initiated a Free Trade Agreement.  Criticism on free trade Free trade has caused more U. Phase I of the Agreement stipulates elimination and/or reduction of tariff rates within the following parameters: "Category I": Import customs duties shall be removed in four stages from the entry into force of the Agreement. Within a year.S. Free trade enables countries to specialize in the of those goods the in which they of have production  Free trade comparative advantages. As a first step. 2006. 2005 which became operational on 1st January. the two countries signed an Early Harvest Program (EHP) on 5th April. jobs losses than gains especially for higher wages jobs. improves efficiency resource allocation that leads to higher productivity. both in terms of tariff lines and trade volume within a ‘reasonable’ period of time.  Economic growth of the trading nations. Pakistan and China signed the Free Trade Agreement and finalized the modalities for Phase I which will cover the first five years under the preferential agreement.

Australia signed a free trade agreement with Thailand in 2005. This agreement was designed to increase exports of Australian raw materials and agricultural products and increase imports of US services from the US economy.10 25% 50% 75% 100% Some current developments in Free Trade Agreements in Australia • Thailand.01. • ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). On January 2010 the Australian Trade Minister 4|Page . • Chile. Australia signed a free trade agreement with Singapore in 2003 to increase the import and exports of banking and education services as well as other services like environmental and telecommunications services.09 01. Australia signed a free trade agreement with Chile in 2009 to reduce tariffs and boost trade between these two countries. Tariffs on all existing merchandise trade were to be removed by 2015.01.01. • The United States. • Singapore. The agreement was designed to reduce tariffs on products exported and imported by both countries.Table 1: Category I Entry into force 01. Australia signed a free trade agreement with the United States in 2005. By 2010 tariffs on 95% of current trade between both countries were to fall to 0%.08 01.

the government. These prices. in turn. Japan. That is to say. It should eliminate tariffs on 96% of our current exports to ASEAN nations by 2020. Malaysia and Gulf countries on possible future FTAs Free market The term free market economy means a system where the buyers and sellers are solely responsible for the choices they make. are fixed by the forces of supply and demand of a respective commodity. Australia is also negotiating with countries including China. The role of the government of a nation is only limited to controlling the law and order of a country and to ensure that a 'fair price' is charged by the sellers. Korea. In a way.announced the commencement of our largest free trade agreement. has to see that the prices taken by the sellers is true and commensurate with the price determined by the forces of demand and supply Advantages of free market: These are the following advantages of free market: 5|Page . free market gives the absolute power to prices to determine the allocation and distribution of goods and services. having no role in administering the price of a commodity. This agreement sees the removal of a range of tariffs on Australian exports to ASEAN nations such as Malaysia and the Philippines. Free market economy is also characterized by free trade without any tariffs or subsidies imposed by the government. In cases of demand falling short of the supply of a respective commodity. Future FTAs. the price will fall as opposed to a price rise when the supply is inadequate to meet the growing demand of a good or service.

 A free market offers continual innovation.  High Income mobility.  The social effects of production may be ignored.  The free market respond quickly to the consumer’s wants  The market system encourages the use of new and better methods & machines to produce goods and services. 6|Page .  The market system allocates more goods and services to those consumers who have more money then other. The market produces a vide variety of goods & services to meet the consumer’s wants.  Free market fails to provide certain goods or services. Disadvantages  Factor of production will be employed on the basis of profitability.  Free market can encourage the use of harmful goods.  Market is run on supply & demand so there is no chance of monopoly.