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Do you know how trade makes everyone better off ? And, is it possible with barriers to entry ? What would happen when there are barriers on both commodities and markets ? What is relation between open markets and free trade ?
Really, these are enough to make loud noise in your thought factory. No doubt, unless you know the importance of open markets and free trade, you cannot explore the casual link of above questions.
Concept clarity of open markets and free trade
What is mean by “market” — meaning and definition
•Simply, market is a common place where buyers and sellers meet to exchange commodities by the means of money.
•But, recently, online market is getting too much popularity. And, beyond doubt, it might prove game changer in the near future. It may be local, national, or global market.
•Moreover, on the basis of sold commodity, markets can be divided into various categories.
Difference between closed market and open market
•Economically, entry and extent of market matters a lot. Like, larger the market, better the participants. Technically, in the larger size, forces of market act better to benefit everyone.
•Certainly, regulatory framework of respective nations is the major deciding factor whether it is closed or open market.
•For concept clarity, Open free market manifests lesser regulatory barriers to entry for new entrants. Whereas, closed market is subject of excessive regulatory burden, and barriers to entry.
What is free trade — meaning and definition
“Free trade means absence of tariffs barriers between consumers and producers in the international market”
For example, suppose, US exports some sports products to Brazil at $100 per unit. And, if in Brazil, the product is available at the same rate for consumers, then, we could say that destination nation hasn’t imposed any tarrifs, duties or any other taxes on the goods of US.
•Specially, it only happens when both nations are agreed for free trade of goods, services and other factors with no or minimum barriers.
Difference between open markets and free trade
So far, you might have learned what is open markets and free trade policy in the form of definition. Now, let’s go deeper to know the difference between open markets and free trade policy.
•In simple terms, Open market is a product of regulatory framework of respective nation. In this case, nation in question decides to reduce barriers to entry in market. In other words, anyone can produce, as well as sell any product without prior permission of authority.
•For plain understanding, it is the process of liberalizing country’s economy to invite more players to participate.
“In such system, only market forces decides the prices of commodities, and no one is price maker”.
On the other hand, free trade is a policy decision taken by two or more nations. It is all about to reduce the tarrifs barriers between consumers and producers.
Are open markets and free trade different or intertwined ?
In this way, both are intertwined. One reduces the barrier between producers and consumers to make product cost effective. Whereas, other helps to make perfect competitive market to make everyone price taker.
Finally, both are complementary and interdependent. One awards entry; whereas, other breaks down economical distance.