What is ‘free trade’?

Free trade is the idea that things should be able to be traded between countries with as few restrictions or limitations as possible. Pretty much nowhere in the word has 100% free trade; every country has a complex set of taxes on foreign goods (called tariffs), limits on how many goods can be brought in (called quotas) and outright restrictions on importing certain things. When people talk about ‘free trade’ they are talking about removing, or lessening some of these restrictions.

The idea of free trade is both loved and despised. Some people think it makes everyone richer and promotes development in poorer countries. Others think it increases inequality and gives corporations too much power.

People who support free trade often start with the idea of ‘comparative advantage’. In short, every country is better at making some goods than they are at making other goods. So instead of every country trying to make all the things they want, it makes more sense for each country to specialize and make the things they’re best suited to make. Then everyone can trade what they have for what they want. Because each country is doing what they’re best at, less time and resources are wasted, and there’s more to go around for everyone.

But for a lot of critics, it’s not just the size of the pie that matters, but who gets what. They argue that even if free trade actually creates more wealth overall, most of that wealth goes to the richest and most powerful, at the expense of everyone else. In richer countries people worry that free trade will make it easier for their jobs to be moved overseas. In poorer countries people worry that free trade will give international corporations too much control over their economies (and politics).

There’s also an argument that free trade makes it harder for countries to develop from poor to rich. If every country specializes in what they’re ‘best’ at making, poorer countries can get stuck specializing in lower wage industries like mining, fishing or farming. Instead they argue that some degree of protectionism is needed to build up more advanced industries.

In all of this it's good to keep in mind that details matter. Some trade deals actually have provisions to help the people likely to be hurt by more trade. Other have provisions intended to force countries to protect the environment or improve working conditions. Other deals don’t do this at all.

Also, not all trade has the same economic consequences. For instance, trade between countries with similar economies—like the countries within Western Europe— is very different from trade between the EU and China. That’s part of the reason people can be for free trade in some cases and against it in others.