The benefits of free trade can be debated.
- How did econlife compare Paris and Rotterdam to Lagos and Accra?
- How far is Lagos, Nigeria from Accra, Ghana?
- What could slow the movement of traded goods between Lagos and Accra?
- In one sentence, state a fact that is illustrated by the graph on Africa’s extra-regional trade.
- What is AfCFTA?
- As of April 2021, how many African countries have signed AfCFTA?
- As of April 2021, how many African countries have ratified AfCFTA?
- Name the three kinds of trade barriers that will be diminished by AfCFTA according to the graph at the end of the econlife
- What is a transaction cost?
- Explain how free trade lowers transaction costs.
The Economic Idea: Free Trade
When two nations engage in free trade, there are no barriers that block the movement of goods and services that they buy from each other. There would be no taxes (called tariffs) that people have to pay when an item enters a country. There are no special characteristics that goods from another country have to satisfy. There would be no limits on the number of items producers can send to the trading partner.
Free trade creates benefits and problems. When countries eliminate tariff and non-tariff barriers, they open up new buyers for their products. The people in a country with free trade have access to a greater variety of goods and services. Free trade can lower prices because it adds to competition. Also though, when there is free trade, workers can lose jobs if the items that enter the country cost less than the ones that they make. They also can lose jobs if workers elsewhere are paid less.
Activity Goal: To become more familiar with trade issues.
Procedure: Forming small “opinion groups” and then debating those opinions as a class.
Please assume the following:
- Your country manufactures “widgets.”
- Currently, every widget that enters the country becomes more expensive because of a tariff.
- The head of your nation is talking with the leader of another country that sells widgets inside your country about eliminating tariffs and other trade barriers.
1.The class should divide into five groups:
These are the groups:
- The consumers that buy widgets.
- The workers that make widgets.
- The business manufacturers that make widgets.
- The politicians in towns where widgets are made.
- The politicians in towns that have no manufacturing.
2.Each group should write a letter to the head of your country. In that letter, express your opinion of the trade negotiations. Based on the identity of your group, be sure to try to persuade your national leader to take a position that would benefit your group.
- Re-gather as a class.
- Each group should read its letter to everyone.
- By challenging other groups’ conclusions, the class can debate free trade.