Global Economy and Development -

Running head: GLOBAL ECONOMY
GLOBAL ECONOMY
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GLOBAL ECONOMY1
Table of Contents
Answer to Question 2: Argument for or against free trade with respect to trade liberalism...........2
Free trade.........................................................................................................................................2
Answer to Question 4: Climate change illustrates the challenges of global economic governance
and the effect on economic costs.....................................................................................................6
Reference List................................................................................................................................12

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Answer to Question 2: Argument for or against free trade with respect to trade liberalism
Free trade
Free trade is defined as the free exchange of goods and services across international
borders. There is no trade restrictions that might hamper the exchange of free trade. Imports and
exports are not restricted and facilitates easy exchange of services. Free trade varies across
nations and depends on the decisions of political parties (Anderson and Yotov 2016). In modern
terms, free trade refers to a minimum rate of tariff that is imposed for trade exchange without
restricting trade. Free trade is governed by political parties who holds liberal economic positions
as against the trade restrictive policies. It improves the value of net export and gives access to
high quality goods at a lower price level.
Competition increases across nations such that companies are encouraged to expand their
services across various countries and gain huge revenues. Free trade is reported to increase the
efficiency level of the markets and help to develop the conditions of economies. It leads to
economic growth due to exchange of goods and services across nations (Bolle 2016). The
advantage of free trade lies in the exchange of technology, machines, inputs, raw materials, labor
and several, other tools that is needed in the production. It enables companies to easily export or
import goods at low prices that is gives them a comparative advantage in production.
Benefits of free trade
Trade is adopted by several economies due its benefits. The benefits of free trade are an increase
in the size of the economy, rise consumer and producer surplus, reduced cost of trading and
increased competition, protection against the destructive trade wars, rise in economic growth and

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development, decline in government expenditure, provision of dynamic business climate and a
rise in foreign direct investment and technological transfer
Free trade enables companies to import input goods at low prices which lower the overall
production cost. As a result, companies are able to sell the good at low price without any
restriction or export tariffs that leads to a greater consumer demand in the international market.
The price provided by companies are much lower than what consumers are willing to pay, which
results in increased consumer satisfaction and surplus. Increased sale of the product at low price
leads to a rise in revenue and overall profit level (George 2017). Increased usage of products by
the consumers which is unavailable in their own country. This also enhances business expansion
across economies with high rate of return.
Free trade enhances the economic performance and increase the economic growth. Rise in
revenue of the firms, raise the national income of the economy which leads to economic growth.
Companies can easily enter the market which increases the level of competition across various
sectors. Greater competition improves the quality of the products because consumers will prefer
good quality products. Without free trade, companies remain protected and stagnant inside a
particular economy. Competing in the global market provides with a dynamic business climate
that fosters productivity and business development (Low 2016). It increases the size of economy
in various markets. Government expenditure goes down as market operate freely and
government does not need to subsidize firms to increase the trade structure.
Transfer of technology becomes easier which increases the efficiency level of economies.
Adoption of advance technologies in the course of production facilitates easy production by
increasing the level of output at lesser time. Labors are also transferred such that companies can
get skilled labor at low price. People can easily move to other economies and get jobs. The cost