Is free trade fair trade?

Which of the following is an appropriate response from an economist in favor of free trade?

• Economic globalization consists of three components: the free trade of goods and services, labor mobility (immigration), and financial capital mobility. Although economic globalization and free trade are not necessarily the same issue, the media often focus on the debate over free trade when they mention "globalization." The following questions examine some of the arguments against free trade and the responses from economists. Lian says, "The recent rise in the unemployment rate was accompanied by a rise in the trade deficit. This is conclusive evidence that we must impose antitrade policies to prevent any more leakages from our fragile economy!" Which of the following is an appropriate response from an economist in favor of free trade? A. Free trade strengthens both expansionary fiscal and monetary policies. Antitrade policies would reduce these policies' ability to get the economy out of a recession. B. The unemployment rate tends to fall when there is a trade deficit, and the unemployment rate tends to rise when there is a trade surplus. C. Correlation is not causation. When the economy expands, unemployment falls. When the economy contracts, unemployment rises. This occurs regardless of the trade balance. D. It is conclusive that the trade deficit caused the unemployment rate to rise, but the benefits from free trade outweigh its costs.

• Answer:

  C. Best answer by far.