However, poor countries that have adopted a free trade policy have experienced strong economic growth, with China and India being perfect examples. Free trade allows companies in rich countries to invest directly in poor countries, share knowledge, provide capital and access markets. Economists largely agree that protectionism has negative effects on economic growth and economic prosperity, while free trade and the removal of trade barriers have positive effects on economic growth.[11][11][12][12][13] and economic stability. [15] However, trade liberalization can lead to significant and unevenly distributed losses and economic disorganization of workers in competing import sectors. [10] The pros and cons of free trade agreements affect employment, business growth and living standards: many proponents of economic nationalism and the school of commercialism have long presented free trade as a form of colonialism or imperialism. In the 19th century, such groups criticized British demands for free trade as cover for the British Empire, particularly in the works of the American Henry Clay, architect of the American system[70] and the German-American economist Friedrich List (1789-1846). [71] Or there are guidelines that exempt certain products from duty-free status to protect domestic producers from foreign competition in their industries. This has three major effects on social welfare. Consumers are less well off due to the decline in consumer surplus (green region). Producers are doing better because the surplus of production (yellow region) is increasing. The government also has additional tax revenues (blue region). However, the loss to consumers is greater than that of producers and government.

The extent of this social loss is reflected in the two pink triangles. The abolition of tariffs and free trade would be a net benefit to society. [20] [21] According to current economic theory, the selective application of free trade agreements to some countries and tariffs to others can lead to economic inefficiency due to the process of trade diversion. It is effective for a good to be produced by the country, which is the most profitable producer, but that is not always the case when a producer has a free trade agreement at great expense, while the low-priced producer is priced at a high price. The application of free trade to the producer at high costs and not to a low-priced producer can lead to a reorientation of trade and a net economic loss. That is why many economists place as much importance on negotiations on global tariff reductions as the Doha Round. [16] Yet a certain level of protectionism is the global norm. Most developed nations maintain controversial agricultural tariffs.

From 1820 to 1980, average tariffs on manufactured goods in twelve industrialized countries ranged from 11 to 32%. In developing countries, average tariffs on industrial products are about 34%. [52] American economist C. Fred Bergsten developed bicycle theory to describe trade policy. In this model, trade policy is dynamically unstable, constantly moving towards either liberalisation or protectionism.