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Free Trade

The policy of placing no restriction on the transaction of goods and services between countries is known as free trade policy.

Free trade was propounded by classical economist Adam Smith. According to him, “Free trade is used to denote that system of commercial policy which draws no distinction between domestic and foreign commodities and therefore, neither imposes additional burdens on the latter nor grants any special favor to the former.

Under free trade, a country imports all those goods that it can buy abroad at relatively low price than the domestic cost of production. And export all those goods that it can produce at relatively low cost than the cost of production abroad.


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