Trade Liberalization

Trade liberalization is a governmental policy to reduce restrictions on trade. Bye, tariffs. Bye, quotas. Bye, Felicia.

Trade liberalization is thought to benefit all countries involved. By removing tariffs (taxes on imported stuff) and quotas (quantity restrictions on imported stuff) as well as other trade barriers, both importers and exporters stand to profit.

NAFTA, the North American Free Trade Agreement, is a historically cited example for trade liberalization proponents. The U.S., Canada, and Mexico agreed to have low-to-no trade barriers via NAFTA. While all three of their economies grew, it’s hard to say how much of that was due to trade liberalization.

Naysayers of trade liberalization prefer protectionism: putting in trade barriers to protect local jobs from foreign competition. While it’s generally accepted that protectionism isn’t the best for GDP growth, trade liberalization opponents point to the well-being of locals instead. They also point out the potential imbalances with free trade between more developed and less developed countries, which can result in trade imbalances, and create other problems that need to be dealt with.