Explain the advantages of free international trade.

The second reason for international trade to be advantageous lies on the existence of economies of scale in production. Economies of scale means that more output in a long run industry can be achieved at a lower cost. It is also a source of comparative advantage. This means countries can specialise in producing goods where they have developed economies of scale. In this case, countries that are almost identical in all respects can also find advantages to trade. As we all know, most developed countries like the US, Japan and the European Union, have similar technologies, endowments and to some extent similar preferences. However, trade between them makes up a significant share of world trade thanks to the economies of scale. Therefore, world productive efficiency can be improved and more benefits will be gained by trading countries.

Next, international trade allows consumers much wider choice about the product they buy. More varieties of goods will be available due to international trade and   consumers can choose goods from the whole world but not just from the domestic market. Thus, they will have a more satisfying collection of goods and consumer welfare is then improved.

The last reason I should like to state here is that free trade promotes competition which provides a powerful incentive to innovate. A lack of free trade often leads to domestic markets being dominated by a few firms who avoid competition amongst themselves so that firms inside this country have little incentive to improve their products. On the contrary, if free trade takes place, which means more competitions will be forced to occur, not only are new goods and services being put onto the market, but firms are also competing to find production methods which cut costs and improve the quality and reliability of goods. Some firms also copy the innovation of other firms to remain competitive. The few countries in the world which for political reasons have chosen to isolate themselves from trade and attempt to be self-sufficient, like North Korea, have found that over time their economies have tended to stagnate because on their own, they do not have the resources or the incentives to keep up with the pace of innovation in the outside world.

For these reasons, free international trade is advantageous and should be advocated around the world.