Globalization can be defined as the opening of native as well as nationalistic views to a much broader outlook of an interconnected and interdependent world with free movement of capital goods, commodities and services across the national frontiers. It is a process that leads to international unification or the formation of a single market which is the result of exchange of product ideas, worldviews and other aspects of culture.
On the other hand, Free Trade can be defined as a policy or agreement that is formed between two or more nations that enables unbounded import as well as export of goods and services among the partner nations without any tariff barriers, subsidies, quotas or other restrictions on these products and services.
Free trade is an integral part of globalization that has played a crucial role in integrating countries internationally. By removing the quotas and tariff barriers through free trade agreement, it has encouraged globalization.
The advantages of free trade in the global economy are as follow:
Free trade allows nations to concentrate on producing their specialties which are normally products other nations cannot produce hence gaining a comparative advantage.
Increase in efficiency and more importantly improvement in allocation of world resources.
Enables access to goods and services not provided domestically.
Technological transfers increases with free trade hence letting the countries to have in place the latest technology for producing goods.
It enables countries to focus on their core competitive advantage hence amplifying their economic output as well as fostering growth. Countries like India and China expanded immensely on adopting free trade principles in the 1980s and 1990s.
The removal of quotas and tariff barriers has lead to the creation of lower prices for the consumers.
It makes it easier and cheaper for companies to export their goods and services while creating job opportunities and boosting the economy.
It causes domestic firms to reduce cost and improve productivity of the products or services provided due to the competition from abroad.