Free trade is an economic practice whereby countries can import and export goods without fear of government intervention. Government intervention includes tariffs and import/export bans or limitations. Free trade offers several benefits to countries, especially those in the developing stage. “Developing countries” is a broad term. According to a widely used definition, a developing country is a nation with low levels of economic resources and/or low standard of living. Developing countries can often advance their economy through strategic free trade agreements.
Increased Economic Resources
Developing countries can benefit from free trade by increasing their amount of or access to economic resources. Nations usually have limited economic resources. Economic resources include land, labor and capital. Land represents the natural resources found within a nations’ borders.
Small developing nations often have the lowest amounts of natural resources in the economic marketplace. Free trade agreements ensure small nations can obtain the economic resources needed to produce consumer goods or services.
Improved Quality of Life
Theoretically, free trade can improve the quality of life for a nation’s citizens. Nations can import goods that are not readily available within their borders. Importing goods may be cheaper for a developing country than attempting to produce consumer goods or services within their borders. Many developing nations do not have the production processes available for converting raw materials into valuable consumer goods.
Developing countries with friendly neighbors may also be able to import goods more often. Importing from neighboring countries ensures a constant flow of goods that are readily available for consumption. Making the process work to benefit residents however requires a well regulated and functional government which is not common in developing nations.
Better Foreign Relations
Better foreign relations is usually an unintended result of free trade. Developing nations are often subject to international threats. Developing strategic free trade relations with more powerful countries can help ensure a developing nation has additional protection from international threats.
Developing countries can also use free trade agreements to improve their military strength and their internal infrastructure, as well as to improve politically. This unintended benefit allows developing countries to learn how they should govern their economy and what types of government policies can best benefit their people.
Improved Production Efficiency
Developing countries can use free trade to improve their production efficiency. Most nations are capable of producing some type of goods or service. However, a lack of knowledge or proper resources can make production inefficient or ineffective.
Free trade allows developing countries to fill in the gaps regarding their production processes. Individual citizens may also visit foreign countries to increase education or experience in specific production or business methods. These individuals can then bring back crucial information about improving the nation’s production processes.