Free trade and protectionism
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- Thu Aug 20 2009
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... Free trade and Protectionism Nowadays, globalisation has made the world such a smaller place. International trade between countries becomes more and more frequent. Therefore governments would likely to decide an act of opening up economies which is known as "free trade". Free trade allows traders to transact without interference from government. Thus, goods and services from everywhere can compete with domestic products and services. It works by bringing down trade barriers such as tariffs. Under this policy, the prices are the sole determinant of resource allocation, and they are a reflection of true supply and demand. However, in order to protect domestic industries and reduce the trade deficits, some governments make policy to keep out foreign goods, which is called "protectionism". Contrast with free trade, protectionism is a policy where the allocation of goods and services between the trading countries are determined by artificial prices that adjusted by governments and do not reflect














