Free trade means free and unrestricted movement of goods between countries. Free trade refers to a condition of international trade when all kinds of artificial controls on international trade, such as tariffs, quotas, etc. are absent. Under free trade, the distinction between domestic trade and international trade disappears.
Free trade policy is also known as the laissez- faire policy, i.e., the policy of government non-interference in foreign trade. Under such a policy, all barriers to the international movement of goods are removed and the trade between the countries is allowed to take its natural course.
According to Adam Smith, free trade is “that system of commercial policy which draws no distinction between domestic and foreign commodities and, therefore, neither imposes additional burdens on the latter, nor grants any special favours to the former.”
Penguin Dictionary defines free trade as “the condition in which the free flow of goods and services in international exchange is neither restricted nor encouraged by direct government intervention.”
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According to Jagdish Bagwati,”Free trade policy involves complete absence of tariffs, quotas, exchange restrictions, taxes and subsidies on production, factor use and consumption.”