Meaning of Free trade
What is Free Trade:
As free trade it is called an economic concept referring to the free exchange of goods and merchandise, without restrictions or limitations. As such, it can refer both to trade that occurs within a domestic market, and to that which takes place in foreign trade.
Free trade within a national market implies freedom of enterprise in an economy governed by free market principles. This would mean that the commercial activity is not subject to restrictions other than those imposed by the commercial activity itself. Some characteristics of free trade in a domestic market are the freedom of prices, hours, opening of establishments, contracting, among other things.
In this sense, factors opposed to free trade are state intervention, according to which the state must participate in the economy as a regulator of trade relations, and interest groups, such as trade unions, employers or unions, which they behave as social organizations in defense of the collective rights of certain groups that participate in the economic apparatus.
Free trade, for its part, in the field of foreign trade, supposes the free movement of goods and merchandise between different nations, which implies the suppression or reduction of trade barriers (tariffs, requirements, regulations, laws, audits, etc. .) in commercial transactions.
See also Tariff and 7 key characteristics of globalization.
However, in terms of foreign trade, the position opposed to free trade is protectionism, that is, the tendency of States to protect their internal economies from foreign products that could take away markets for domestic products.
As a free trade agreement (also known by its acronym as FTA) is called the agreement between countries, either regionally or bilaterally, to reduce or eliminate tariffs for goods and thus promote a greater circulation of goods between the signatory countries of the agreement. As such, free trade agreements must be governed by the rules imposed by the World Trade Organization (WTO) or by those established by mutual agreement by the countries.