Freemovement of goods, services, capital and labor across national borders withoutthe intervention of government regulatory barriers is generally refers to theterm of free trade. Free trade is important because economic growth can begenerate and create more job opportunity in the country. Nowadays, productionsof products are no longer made in one place from start to finish. Instead, theyare located and assembled in different parts of the world. This happen becauseof each country had their own benefits in terms of capital, labour and land.
Becauseof that reason, free trade is very important in economy activities. With freetrade, every economic activity can be implemented without restraint from anyparty, especially the government as long as it does not violate the law. Eachcountry in the world can gain economic benefits from free trades. Means that,free trade can promote worldwide sustainable growth and development. Gomes(2003) point out that “free trade placed particular emphasis on the gains tothe domestic consumer and the stimulus to competition provided by a regime ofunrestricted trade” (p.26). Thus the freedom of buying and selling activitiesthat occur will make sure that the consumer will get merchandise at the lowestprice. Free trade is a trigger to efficiency in other ways besides acting oncosts, it also stimulates development of new products, the search for new andthe adoption of the latest techniques (Gomes, 2003).
That’s means, free tradeis not only beneficial to the manufacturer, but also benefits the consumers.Consumers are also one of the most important entities in economic activity.Without consumer, economic activity cannot run smoothly. With free trade,customers get more economic advantages in buying and selling activities,especially in trading activities that involve relationships with other countryin the world. The relationship that occur also will bring the new developmentof skills, knowledge, and efficiency of the country in doing economicactivities. Berkshire(2011) point out that free trade “also refers to the bilateral and regionalagreements that liberalize trade between trading partners” (p.239). Free tradewill not happen without the bilateral relationship between the two countries.
Withregional agreements, each member involved in the agreement knows the commitmentthey must adhere to and obeys in order to avoid cheating in economic activityespecially when it involves bilateral relations between advanced countries anddeveloping countries. An agreement for free trade also known as free tradeagreements (FTAs) and occupy a dominant position in the international traderegime. With FTAs, the level of trade between members of countries will expandand they are likely to divert and reduce trade with non-members, therebyaffecting the economies of both member and non-members countries (Findlay , 2010). In globaltrade, mainstream economist have broadly agreed that any nation can benefitseconomically by trading and specialising in production of goods or services forwhich it has comparative advantages. That is the least cost in term of otherproduction forgone. Every country, whether rich or poor, large or small, hascomparative advantage in something so can obtain gains from trade. Global freetrades also leads to structural rationalisation which in turn leads to a moreefficient resource allocation.
As an example, chemicals comparative advantagehas in oil producing nations. As a result, Mexico, Saudi Arabia, and Kuwaitcompete well with United States chemical production firms and their opportunitycost is low. As a result, their chemicals is less expensive because a lot ofthe raw ingredients are produced in the oil distillery process. With trade, eachcountry can consume what it produces and both country can consume more of bothgoods. Inglobal economy, Asia has a unique place and condition. Its inhabitants includethe world’s poorest and also the richest. Through trade, some countries in Asiahave brought a dramatic improvement in the living standards of their people.
The data that release by World Development Indicators, World Bank, 2003, showsthat growth rate in GDP per year is increasing in the Asia country. This growthrates show that output and trade in Asia countries was growing faster rate thanthe rest of the world. This is because export and import activities activelyoccur in the Asia countries.
For example, Singapore trade with China,Indonesia, Malaysia, Philippines, and India. This shows that the rate of growthwas relatively growth with other Asian countries. Inconclusion, free trade involves the import and export activities that involvesthe sale and the purchase of goods and services to residents from othercountries to other countries. with free trade, GDP in certain countries isincrease year by year and help in growth of economic activities.