Free Trade Definition

The term free trade may be defined in various interpretations but fundamentally, free trade

refers to the free movement of goods, services, labor, and capital across national borders without

government-imposed economic and regulatory barriers.(Berkshire:2011) By having said that, free

trade would mean an easier access of trading, less complex restrictions on across-border trade,

bilateral or even multilateral cooperation, lower tariff on trade, products and technology exchange,

labor transfers, global market, and a robust economic competition for sure. Seeing how intense the

economic competition is, free trade would not go easy towards all countries. Those who have

sustainable and adequate capabilities may be able to endure and

However, free trade cannot guarantee a country to be rapidly developed and rich because every

country has different characteristics and distinctive trade-factors condition that „may‟ or „may not‟ fit

the concept of free trade. So if by any chance an „incompatible‟ country forces itself to implement

free trade, a loss and domestic economy-downturn is very probable to happen. And as free trade can

possibly bring more harms than good to a certain country, the other option offered to the country

would be implementing protectionism for its economy. Therefore in this paper; responding to a case

of a country with abundant capital and land but is scarce of labors, the writer is going to discuss

about the trade‟s factors endowment from the glasses of Stolper-Samuelson theorem, and whether

free trade is best applied to the case.

Stolper–Samuelson Theorem

As the gains and loses of free trade and protectionism are relative, it is kind of unfeasible

For example, as many other countries are lack of

land factors, it is a golden opportunity for a land-rich country to export their products and get

significant income increment – land condition is by nature, but labor capability is by training so,

having a rich land is a grace not to waste.

Secondly, as much as the country needs „land‟ and „capital‟ factor to glorify the economy,

those two factors need sufficient number of labors. Since the country is lack of labors, doing the free

trade will be the solution then. By applying one, there will possibly be a rising number of workers

that come to the country, and the competition will urge all of them to be qualified both in skills and

Third, having a free trade will foster the country‟s societies to be innovative, competitive, and

to develop. The terror of being lost in the competition will encourage all layers of the society to

develop themselves to win the market. Thereafter, the country will have something different