Indonesia Need Free Trade

Free trade, it is one of the most popular policies advocated by economic liberals where there is no intervention from government because it will only lower or undermines efficiency and overall wealth.

It erase or remove protectionist measures that are designed to insulate domestic producers from international competition. which means it erase all the things that may hinder the mechanism of free trade such as tarrif, import quotas and taxes. Free trade is exemplified by the European Union / European Economic Area and the North American Free Trade Agreement, which have established open markets. Most nations are today members of the World Trade Organization (WTO) multilateral trade agreements. However, most governments still impose some protectionist policies that are intended to support local employment, such as applying tariffs to imports or subsidies to exports. Governments may also restrict free trade to limit exports of natural resources.

There are two big Figures in the history of free trade, Adam Smith and David Ricardo. Ricardo said that free trade is an international trading system where every nations are free to do trading without any intervention from country. he also thought that  A free trade policy should enable a nation to generate enough foreign currency to purchase the products or services that it does not produce indigenously. The process works best when there are few if any barriers to entry for such imports. The imposition of artificial constraints such as tariffs on imports or the provision of subsidies to exports will introduce distortions and impede free trade.

 As for Adam Smith, he came with a theory, the Invinsible hands Theory. In that theory, Adam Smith argued that in economic activity there is no need for government's intervention, and if each individuals are free to do the economic activity there will be a higher efficiency, and in time that efficiency will become a strong economic growth. well, Adam smith admitted that goverment have a role in a country's economics. But it only limited at  infrastructure supply & development and running the government's administration. if government interfere too much, it will only lower the economic efficiency. 

 Free trade is a win-win proposition because it enables nations to focus on their core competitive advantages, thereby maximizing economic output and fostering income growth for their citizens. Free trade enables nations to concentrate their efforts on manufacturing products or providing services where they have a distinct comparative advantage. that is why i said Indonesia need free trade, because it could improve the economic growth in Indonesia. however, putting those advantages and positive side of free trade aside, Indonesia also have to strengthen the rule about import or at least be more careful with it. why? it is to prevent a bombardment by import stuff from other country.

Yusuf Mukhlisin - 1701345430

refference:

http://nursukasri.blogspot.com/2012/10/free-trade.html

http://www.investopedia.com/terms/f/free-trade.asp

http://en.wikipedia.org/wiki/Free_trade

Introduction to Internatinal Politic economy, David N. Balaam, Bradford Dillman, Ffith edition