free trade

free trade

noun

Definition of FREE TRADE

: trade based on the unrestricted international exchange of goods with tariffs used only as a source of revenue

First Known Use of FREE TRADE

1655

free trade

noun    (Concise Encyclopedia)

Policy in which a government does not discriminate against imports or interfere with exports. A free-trade policy does not necessarily imply that the government abandons all control and taxation of imports and exports, but rather that it refrains from actions specifically designed to hinder international trade, such as tariff barriers, currency restrictions, and import quotas. The theoretical case for free trade is based on Adam Smith's argument that the division of labour among countries leads to specialization, greater efficiency, and higher aggregate production. The way to foster such a division of labour, Smith believed, is to allow nations to make and sell whatever products can compete successfully in an international market.