As an expert in international economics, I've spent a significant amount of time studying the effects of free trade on the global economy and the standard of living of people. Let's delve into why free trade generally increases people's standard of living, taking into account the provided reference and expanding upon it with additional insights.

Step 1: English Answer

Free trade is the economic policy where countries allow the movement of goods and services across their borders without artificial barriers like tariffs, quotas, or protectionist measures. It is widely recognized as a driver for economic growth and an enhancer of the standard of living for several reasons:


1. Specialization and Comparative Advantage: Free trade allows countries to specialize in producing goods and services in which they have a comparative advantage. This means they focus on producing what they are best at, leading to greater efficiency and lower costs. As a result, consumers benefit from a wider variety of goods at lower prices.


2. Increased Competition: When businesses face competition from foreign companies, they are incentivized to innovate and improve their products and services to remain competitive. This can lead to better quality products and services at lower prices, which directly improves the standard of living.


3. Access to a Larger Market: Free trade opens up access to a global market for businesses. This can lead to economies of scale, where increased production can lead to lower average costs, translating into lower prices for consumers.


4. Lower Prices and Greater Variety: Consumers have access to a wider array of goods from around the world. The increased competition and the elimination of trade barriers often result in lower prices, allowing consumers to purchase more with the same income.


5. Efficient Allocation of Resources: Free trade ensures that resources are allocated more efficiently. Countries can focus on producing what they are best at and trade for what they are not, leading to a more efficient use of resources and an increase in overall wealth.


6. Job Creation and Economic Growth: By tapping into new markets, businesses can grow and create new jobs. This can lead to higher employment rates and increased wages, which are key components of a higher standard of living.

7.
Technological Advancements: Trade often brings with it the exchange of ideas and technology. Countries can adopt and adapt new technologies, which can lead to productivity increases and better products.

8.
Risk Diversification: By trading with multiple countries, a nation can diversify its economic risks. If one industry or market faces downturns, others can compensate, providing a more stable economic environment.

9.
Long-term Prosperity: Over time, free trade can lead to a more integrated global economy, fostering cooperation and reducing the likelihood of conflicts. This stable environment is conducive to long-term prosperity.

10.
Poverty Reduction: In many cases, free trade has been linked to poverty reduction as it opens up opportunities for developing countries to sell their goods on the global market, leading to economic growth and improved living conditions.

However, it's important to note that while free trade has many benefits, it also presents challenges such as job displacement in certain sectors and the need for social safety nets to protect those affected by trade-related changes.

Step 2: Divider

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Free trade improves people's living standards because it allows them to consume higher quality goods at less expensive prices. ... As a result of the exchange, both trading parties gain from producing more efficiently and consuming higher quality goods and services at lower prices.May 24, 2004read more >>