![]() Imports will increase from Q3-Q2 to Q4-Q1.This fall in prices enables an increase in consumer surplus of areas 1 + 2 + 3 + 4.The removal of tariffs leads to lower prices for consumers (Prices fall from P1 to P2).Trade creation occurs when consumption switches from high-cost producers to low-cost producers. Reducing tariff barriers leads to trade creation ![]() Free trade enables countries to specialise in those goods where they have a comparative advantage.Ģ. This explains that by specialising in goods where countries have a lower opportunity cost, there can be an increase in economic welfare for all countries. In more detail, the benefits of free trade include: Free trade means that countries can import and export goods without any tariff barriers or other non-tariff barriers to trade.Įssentially, free trade enables lower prices for consumers, increased exports, benefits from economies of scale and a greater choice of goods.
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