Every country in the world conducts free trade. By holding free trade, we can get goods that are not available in our country. Chacholiades in his book argues that countries cannot live alone any more effectively than individuals can (Chacholiades, M. 1988, page 397). That’s why free trade among countries is needed. Spring Singapore (2005) argues that inside free trade, there is an FTA or Free Trade Agreement. A free trade agreement (FTA) is a legally binding agreement between two or more countries to liberalise trade and bring about closer economic integration. FTA allows the partners to give each other preferential market access. The FTA also facilitates the course of free trade between countries with other countries. so FTA has advantages for countries. The following are the theories regarding free trade agreements and the benefits of free trade.
The theoretical case for free trade is based on Adam Smith’s argument that the division of labor among countries leads to specialization, greater efficiency, and higher aggregate production (The Editors of Encyclopaedia Britannica. 2006). FTA has bilateral and multilateral agreements. The bilateral agreement is an agreement between two countries to regulate the policies of both parties. For example, Indonesia's bilateral engagement with other countries, Indonesia's cooperation with Brunei Darussalam takes place in the field of export-import trade of goods. Meanwhile, Multilateral agreements are agreements held by several countries to regulate mutual interests among the participants of such agreements. One example of a multilateral agreement is AFTA (ASEAN Free Trade Area). AFTA is an economic agreement on the local production sector in ASEAN countries. ASEAN member countries agree to sign AFTA to cooperate in the economic field (Bobsusanto. 2017, February 7). The above two agreements describe the agreement of the narrow side (bilateral) and the broad side (multilateral).
Boudreaux (2017) argues about benefits free trade. Free trade increases prosperity for all citizens by allowing consumers to buy more, better quality products at lower costs. This encourages economic growth of a country (Boudreaux, Donald J. 2017, January 31). For example, the country that has economic growth in Asia is Saudi Arabia. Saudi Arabia is a country with the largest economic growth in the middle east with an average income of US $ 53.149 per year or equivalent to Rp 708 million per year (estimated exchange rate 13.333 per US dollar). Saudi Arabia is the richest country in Asia (Liputan 6. march 28, 2016).
From the above materials, I can conclude that free trade is an economic activity that is inevitable by countries in the world. Free trade itself has been proven to improve the economy of a country for example Saudi Arabia. Every country on earth conducts free trade because it has many advantages.
REFERENCE
Chacholiades, M. (1988). International Trade Theory and Policy.Singapore: Â McGraw-Hill Book Co.
Spring Singapore. (2005, June). Free Trade Agreements (Trade in Goods). Retrieved from https://www.spring.gov.sg/Resources/Documents/Guidebook_FTA_Guide_Goods.pdf
The Editors of Encyclopædia Britannica. (2006). Free Trade Economics. Retrieved from https://www.britannica.com/topic/free-trade
Boudreaux, Donald J. (2017, January 31). The Benefits Of Free Trade: Addressing Key Myths. Retrieved from https://www.mercatus.org/publication/benefits-free-trade-addressing-key-myths
Bobsusanto. (2017, February 7). Pengertian AFTA Beserta Anggota dan Tujuan AFTA Lengkap. Retrieved from http://www.spengetahuan.com/2017/02/pengertian-afta-beserta-anggota-dan-tujuan-afta-lengkap.html
Liputan 6. (2016, March 28). 10 Negara Dengan Pendapatan Tertinggi di Asia. Retrieved from http://bisnis.liputan6.com/read/2469051/10-negara-dengan-pendapatan-tertinggi-di-asia
