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Free Trade

Definition

Free trade refers to the exchange of goods and services between countries without restrictions or barriers such as tariffs or quotas. It promotes economic growth by allowing countries to specialize in producing what they are most efficient at.

Analogy

Imagine you're trading Pokémon cards with your friends without any rules or limitations. You can freely exchange cards based on what you want or need. This is similar to free trade where countries can trade goods without obstacles.

Related terms

Tariffs: Taxes imposed on imported goods by governments to make them more expensive compared to domestically produced goods.

World Trade Organization (WTO): An international organization that deals with global rules of trade between nations and resolves disputes related to trade agreements.

Comparative Advantage: The ability of a country or individual to produce a good or service at a lower opportunity cost than others.