Free trade concept is known as international trade without interference or barriers from governments. Free trade first known in early of 16th century. At that time , after the set in of feudal system in Europe, mercantilism policy has grew up. This policy focused on the principle that one nation gain is a loss to another. The benefit of foreign trade in that time was measured by the imports amount of gold and silver. Therefore, there was no net gain from trade. In 18th century Adam Smith, an 18th-century Scottish economist, challenged the idea in his book "wealth of Nations". He proved that free trading benefit both parties and showed how the scales of economy, which result from specialization in manufacturing, improve growth and productivity. Smith believed that free trade will change the international commerce. However, he was also believed that there are exceptions to the general principles of free trade (Farmer, 2011). Later in 1817, the English economist David Ricardo came up with his theory of comparative advantage which extended and refined Smith's argument about the benefits of mutual international trade between two nations. Ricardo's theory was formulated based on a lot of assumptions, 11 assumptions according to (Carbaugh, 2011). And since that time economists have been arguing whether or not that free trade will be the best for an international economy. However, are the economists that support free trade theory agree that it is always optimum? What is the implication of that argument?.
Arguments about Free Trade and Economists Positions.
In the real world, countries are looking for increase in its return and there is no pure perfect competition. Hence, in industry that has large scale of economy the countries should follow a strategy by which it can prevent the loose to it is domestic companies because of the advantages of the foreign companies. This view of trade called strategic view.