What are the potential costs of adopting a free trade regime?
do you think governments should do anything to reduce these costs? What?
Answer:
Some people will lose their jobs.
It can be socially beneficial to ease the transition, for example by subsidies that have the effect of biasing the market so that new businesses set up in places where the job losses will be greatest.
Also governments can provide or subsidise retraining programmes so that job-losers are personally enabled to move into the larger number of new jobs that free trade will create.
While there are many benefits to adopting free trade, there are some potential costs. One of the biggest costs is that the local economy becomes more vulnerable to fluctuations in the global economy.
As the saying goes, if you are a small, open economy, you get a cold whenever the U.S. sneezes.
Countries can protect themselves to some degree by having somewhat larger but flexible welfare programs. If someone loses their job, they need income support and probably job training to get them back to work.
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Answer:
Some people will lose their jobs.
It can be socially beneficial to ease the transition, for example by subsidies that have the effect of biasing the market so that new businesses set up in places where the job losses will be greatest.
Also governments can provide or subsidise retraining programmes so that job-losers are personally enabled to move into the larger number of new jobs that free trade will create.
While there are many benefits to adopting free trade, there are some potential costs. One of the biggest costs is that the local economy becomes more vulnerable to fluctuations in the global economy.
As the saying goes, if you are a small, open economy, you get a cold whenever the U.S. sneezes.
Countries can protect themselves to some degree by having somewhat larger but flexible welfare programs. If someone loses their job, they need income support and probably job training to get them back to work.
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