Free trade chart

As before the country was producing 9 tons of apple and selling them at 3.50€ a kilo, yet, as consumers would always like more, and the World price is only at 2.00€. The domestic production is cut down by 3tons so they would sell at the price of 2€ like the world price. Yet at that point more people want to buy apples. As we decreased the domestic production to only 6tons, yet at the given price people want to buy 12tons, we have to import the remaining 6 tons.

Advantages that come with free trade

• Increased production: Free trade enables countries to specialise in the production of those commodities in which they have a comparative advantage, resulting in lower average costs and increased productivity. More so increased competition promotes innovative production methods, and ensures goods and services, as well as inputs, are supplied at the lowest prices. 

• Production efficiencies: Free trade improves the efficiency of resource allocation. The more efficient use of resources leads to higher productivity and increasing total domestic output of goods and services.

• Benefits to consumers: Consumers benefit in the domestic economy as they can now obtain a greater variety of goods and services. As well as the goods can be bought at the lowest prices possible

• Foreign exchange gains: When countries trade, they pay with their own currency and this money is then used by the supplier country to pay for things they import form other countries.

• Economic growth: The countries involved in free trade experience rising living standards, increased real incomes and higher rates of economic growth. This is created by more competitive industries, increased productivity, efficiency and production levels.

• Employment: Employment will increase in exporting industries. 

Disadvantages of free trade

•  Short term structural unemployment: This can impact upon large numbers of workers, their families and local economies. Often it can be difficult for these workers to find employment in growth industries and government assistance is necessary.

• Increased domestic economic instability from international trade cycles, as economies become dependent on global markets: businesses, employees and consumers are more vulnerable to downturns in the economies of our trading partners.

• International markets are not a level playing field: Countries with surplus products may dump them on world markets at below cost. Some efficient industries may find it difficult to compete for long periods under such conditions. Further, countries whose economies are largely agricultural face unfavourable terms of trade ;ratio of export prices to import prices. 

• Developing or new industries may find it difficult to become established in a competitive environment with no short-term protection policies by governments, according to the infant industries argument, it's difficult for them to develop economies of scale.

• Free trade can lead to pollution and other environmental problems as companies fail to include these costs in the price of goods in trying to compete with companies operating under weaker environmental legislation in some countries.

• Pressure to increase protection: the impact of falling employment means that protection pressures start to rise in many countries.

http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html