Mercantilism and Free Trade - Essay Example

Lahaye further points out that, The Navigation Act passed in 1660 limited the trade to be conducted by English ships and English seamen, and this encouraged English ships' monopoly over trade within British Empire and highly limited the trade of foreign vessels within English ports. Further revisions of the act improved the trade process in England. The revisions of the act ensured that the trade shipped from its point of production to England or colonial port prior to its shipping to its foreign destination.

At the same time, it also demanded the foreign goods set for colonies be stopped in England prior to the distribution. This made England a well-known centre for colonial trade. It encouraged the flow of goods through the country and thereby allowed the taxes to be levied. Further phases of the Navigation Act grouped products as those to be shipped to ports within British Empire and as those to be shipped to foreign countries. It also imposed regulations on the manufacture and trade of colonial products.

The British government supported products like iron, lumber, and other raw materials needed within Empire. At the same time, the colonial products that competed with products produced at home were discouraged. As a matter of fact, the mercantile system in Britain allowed for colonial monopoly over certain markets such as tobacco and also provided the way for the development of colonial shipbuilding. Free trade, as the name implies allows the free movement of goods, capital, and labor between nations.

It provides specialization in the manufacturing and export of products in a country overcoming all possible barriers of the trade process. Free trade enables smooth conduction of trade between countries ‘without the influence or intervention of government through quotas or duties’ (Free trade explained). The scale of production depends on the size of the market; if the market of the nation is small, it may not encourage the producers to produce a variety of products. Free trade combines individual markets with a larger world market proving beneficial to small-sized markets.