Free Trade is imports and exports of goods from countries without any tariff barriers being imposed.

Free trade allows prices to be lower for consumers so exports will be increased and there will be a greater choice and variety for the consumer.

There are advantages of free trade these are the economy will growth slower and the government will spend less money as they will not have to spend money and be able to spend it on other things.

Also there is disadvantages for example poorer working conditions for staff and the need to outsource the companies work load.

An absolute advantage is a nation that can produce services or products cheaper than another nation. As a result of inputs such as labour is cheaper and the levels of labour needed to provide these goods and services. An example of such as India has an absolute advantage in operating call centres compared to the Philippines because of low cost labour and the abundant labour force. (Investopedia, 2005)

A comparative advantage on the other hand is based on opportunity cost where countries can produce products at a cheaper rate than other countries which means they must make less of one product to produce another product that is more cost affective to their business for example

Assume that both France and Italy have enough resources to produce either wine or cheese, but not both. France can produce 20 units of wine or 10 units of cheese. The opportunity cost of each unit of wine, therefore, is 10 / 20, or 0.5 units of cheese. The opportunity cost of each unit of cheese is 20 / 10, or 2 units of wine. Italy is able to produce 30 units of wine or 22 units of cheese. Italy has an absolute advantage for the production of both wine and cheese, but its opportunity cost for cheese is 30 / 22, or 1.36 units of wine, while the cost of wine is 22 / 30, or 0.73 units of cheese. Because France’s opportunity cost for the production of wine is lower than Italy’s, it has the comparative advantage despite Italy being the more efficient producer. Italy’s opportunity cost for cheese is lower, giving it both absolute and comparative advantage (Investopedia. 2016)

International Trade is exchange of services and goods amongst varied countries and regions without any problems arising. It also provides a large part of the country’s gross domestic product and also is a valuable source of income for this country.

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The gains from trading internationally are

• Increasing sales and profits
• Being able to maintain cost competitiveness in the domestic market
• Gains a global market share

This is when government intervenes with actions and policies that restricts or restrains international trade which is in the interest of protecting local businesses there are two different methods of protectionism tariffs which are tax that is imposed on goods when moved across a political boundary and quotas which limits the quality of goods imported during a period.

Is government restrictions on the free trade of services and products that is sold internationally using importing policies was is reflected by tariffs and other import charges.

An example of this is” America prohibited the importation of cheese from France as it protected the health of the American consumer and protected the revenue of the American cheese producer.” (International trade: Barriers to international trade, 2000)