Free trade between countries is new the norm in different parts of the world. And it doesn’t come as a surprise considering there is no interference with quotas, tariffs, or other restrictions when completing an agreement. The trade is simply dependent on market forces and demands rather than being encouraged through subsidies or restricted through taxation.
While free trade is mostly discussed in political conversations, it is rarely practiced in the modern world. In this quick guide, we will take you through some of the cons accompanying free trade between countries.
Outsourcing of Employment Opportunities
Global companies sometimes bring more expertise and better practices to a local industry. But have you ever wondered who gets those jobs? Free trade between countries leads to the outsourcing of job opportunities since international workers are either more experienced, cheaper to hire, or are more than ready to work with fewer safety precautions.
Existence of Sub-Standard Working Conditions
Emerging markets and developing countries lack the same laws in place that protect worker salaries and working conditions. Some markets even allow for children to be hired for heavy labor and factory positions that are sub-par at best. Since free trade places a lot of emphasis on the lack of restrictions, it can lead to poor working conditions that people are forced to contend with if they wish to earn a living for their loved ones.
Reduces Revenues
With free trade between countries, market principles tend to operate without being checked. This means revenues typically reduce due to the high competition levels. This works for large countries, organizations and entities since they are already priced into an economy of scale. Smaller countries, companies, and entities must look for ways to replace the revenues they lose and this is not always possible.
Taking a look at the pros and cons of free trade between countries, you can easily attest to the fact that it can be beneficial. However, it needs to be approached by factoring in the long-term consequences. The main intention of any company is to improve profits.
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