Free trade creates winners and losers - is it desirable?
Isla Vessey, Beatrice Webb, Evie Simpson, Sophie Crisford, Lauren Daly – St George’s School
For years, governments attempted to control the flow of goods and services across borders, with tariffs, quotas and regulations acting like dams, protecting domestic industries from the threats of global competition. However, as economies became increasingly interconnected, these barriers were dismantled in favour of free trade. This provided opportunities: specialisation, increased choice, greater competition and economies of scale. However, although free-flowing rivers can provide prosperity, removing all dams can create a risk of floods. This essay explores whether free trade can be considered desirable when it creates winners and losers.
Free trade drives efficiency by organically directing capital and labour towards a nation's competitive strengths. This natural specialisation reduces inefficiency and boosts global production. Ultimately, it sparks positive market speculation, creating a resilient economy with higher quality goods, lower consumer prices and accelerated GDP growth.
Moreover, free trade can benefit consumers by providing greater choice. Consumers can purchase imports from abroad rather than just domestic products, and can choose between products that are cheaper, higher quality or better tailored to their needs. Producing greater utility for the consumer, but risks increasing their shoe leather costs; hence consumers face opportunity costs since the time spent looking for the best product is time they could have spent elsewhere.
Free trade can also cause greater competition, as more domestic firms are exposed to rivals within the international market. This means firms may be forced to lower costs, improve efficiency or innovate to survive against and outcompete their international adversaries. The presence of foreign firms means domestic companies may need to lower their prices to remain attractive, providing consumers with cheaper options.
The drawbacks of increased competition are prevalent in a domestic market: smaller firms face larger costs; the water is forced to move in small trickles, facing larger-scale barriers than in a domestic market. However, free trade can create global growth by removing barriers to trade, raising living standards, as people are able to earn and spend more money. This leads to a reduction in poverty and better funding for public services, due to incomes rising, causing greater tax revenue for governments which allows investment in infrastructure.
On the other hand, a fast-flowing river of free trade also risks being destructive. When formerly protected domestic industries are suddenly exposed to the freezing waters of global competition, they risk being wiped out completely. To consider this, we can examine the UK’s deindustrialisation in the late 20th century. As manufacturing moved to lower cost economies such as China and Taiwan, entire communities suffered from severe structural unemployment as domestic manufacturing industries closed. The occupational immobility of workers only exacerbated this issue, as many had specialised within a single industry, so lacked the transferable skills needed to quickly find new employment. As a result, while free trade enables greater choice and efficiency, its benefits are not evenly distributed, with the short-term cost of change falling heavily on workers and communities dependent on declining industries.
Beyond the UK, free trade can create over-reliance on foreign supply chains, leaving nations vulnerable to sudden supply-side shocks. This issue was highlighted at the start of the Russia-Ukraine war in 2022, when oil prices surged to $127 per barrel - from $97 just two days before Russia’s invasion. With Russia supplying over 10% of the world’s oil, these disruptions hit reliant economies hard.
Moreover, a growing concern with free trade is its potential to drive environmental degradation. To attract multinational companies seeking lower operating costs, countries may relax environmental policy in a ‘race to the bottom’. Consider Nigeria’s integration into global trade - while it has enabled Nigeria to harness its abundant natural resources by specialising in oil and gas for export, it meant the Nigerian government has welcomed major foreign investors like Shell to operate nationally, resulting in a lack of regulatory oversight and falling standards, which led to severe ecological destruction. According to research published by the UN, since 1958, when Shell began exporting Nigerian oil, an estimated 1.5 million tonnes of crude oil have been spilled across more than 7,000 incidents. This illustrates how trade expansion can generate irreversible damage, exploiting natural resources at the expense of local communities.
Ultimately, managing free trade is not a simple choice between total protectionism and unrestricted markets. While open trade boosts the overall economy, it also creates individual losers. Like a river, blocking economic currents entirely stunts growth, but letting them flow unchecked causes severe disruptions. Therefore, the ultimate challenge is not to stop the current, but to manage it responsibly. Governments must actively intervene to ensure that the wealth generated from global trade is used to support, retrain, and protect workers otherwise left behind by rapid economic change. The goal must be to harness global market efficiency while building the necessary safeguards to ensure no one is swept away.
Sources:
(26% improvement in imports due to specialisation)
(globalisation impacts on the environment - electric vehicle example)
(impacts on the environment - China ev production stats)
(statistics for the prices of oil)
(Environmental degradation in Nigeria)
(inflation data)
(energy price data)
(oil production)
