Free trade can be defined as “The movement of goods and services between nations without political or economic barriers”. Businesses participate in markets like the EU due to the benefits it offers, such as trading with other EU countries without trade barriers. By having a larger market size there are higher levels of competition leading to lower prices for consumers, also, companies have more options on where they can purchase etc. International trade therefore allows the exchange of goods and services across a country's borders. , consumers in different parts of the world can buy goods and services made abroad, which means huge resources, since crossing borders involves some costs such as taxes. A hard Brexit means that the UK only trades under World Trade Organization rules with the EU and Theresa May's decision in January 2017 shows that a hard Brexit is more likely as she wants free trade with the EU while leaving the single market (Dhingra et al. , 2017). This essay will explore the benefits and costs of free trade and the possible implications if we leave the EU. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essayFree trade with the EU is good for business in the UK because according to the European Union's Directorate-General for Trade "the EU works to conclude deals with countries around the world that break down trade barriers, making it easier for European companies to enter markets and find new customers.” The EU providing a larger market size leads to more competition for businesses as they can trade more freely, producing better quality products for customers and can earn customer loyalty which generates more revenue for companies, this reduces costs for consumers and companies will not add any taxes on the products as barriers to trade were removed However, if If the UK withdrew from the EU, levels of trade and investment would be lower because barriers would rise. The EU remains the UK's most important export market for goods and services, but its share of the UK's total exports. The UK has fallen from 55% in 1999 to 45% in 2014, and the UK accounts for at least a tenth of the EU's exports. As exports decline, businesses lose profits as it becomes expensive for other countries to buy from them due to the addition of tariffs. One way to improve the situation is to join the EEA, which is a soft Brexit scenario. This would allow trade with the EU without tariffs and new barriers, however, the downside is that EEA members are not part of the customs union and exports from EEA members to the EU must meet certain rules of origin to enter the EU without tariffs, as trade costs increase as a result. To conclude, at this time the government sees EEA membership as something less than ideal as there are no restrictions on immigration from the EU. Second, free trade with the EU and the UK affects foreign direct investment. Since joining the EU, the UK's total foreign direct investment has grown over time and reached around £1 trillion in 2014. Foreign direct investment allows companies to invest in another country and is key to economic development. As of January 2018, approximately 42.6% of FDI comes from EU countries (Tetlow and Stojanovic, 2018). With the help of free trade agreements, theinvestment restrictions. When there are large amounts of regulations around starting a business overseas, it prevents investment. If the UK wanted to invest in another country this could benefit both countries because knowledge can be transferred as they are able to learn certain skills different from the UK. Furthermore, the EU country the UK is investing in gets job opportunities as more labor is needed to produce goods and services, which increases productivity as more workers can produce more goods, which leads to more profits for the 'agency. So not only does the company benefit from increased profitsIf businesses succeed abroad, they also gain skills and technological advantages. However, foreign direct investment could decline in the UK if Brexit were to occur, assuming the UK unilaterally tightens the European Union's foreign direct investment controls and also assuming both economies restrict the movement of capital across borders l 'of each other. . If the UK went it alone, tightening EU constraints on foreign direct investment, EU organizations would have less incentive to invest in technology. Reduced investment in the EU will therefore have a negative impact on UK businesses. To counter this, UK companies should start investing more in research and development, which is expensive. So, consumption falls and employees would have to work harder, resulting in an overall welfare loss for the UK and businesses would suffer a loss as wage costs rise. Third, productivity is another benefit of free trade. When looking at long-term economic growth, productivity is very important because being more productive leads to more production from workers. This is key when it comes to improving living standards (Tetlow and Stojanovic, 2018). With free trade, countries are able to produce more goods without using more resources. By expanding into other EU countries, they are able to take advantage of the larger market and technological advances that allow them to produce goods faster, therefore being more efficient and increasing productivity. Being in a larger market means that economies of scale can be a big advantage when it comes to reducing production costs. As a result, it decreases costs for companies since they don't have to hire more people to do the work for them. However, when leaving the EU, the impact on productivity comes from reduced exports and FDI. As previously mentioned, the UK plays an important role in exports and when there is a reduction in UK exports, especially in manufacturing and business services, productivity is negatively affected. Foreign-owned companies in the UK have significantly improved productivity levels as their average productivity is higher than that of the UK. Therefore, after leaving the EU, the UK would lose further dynamic spillover effects from these foreign direct investments. This is supported by statistics showing that trading with the EU on WTO terms rather than remaining as a member reduces GDP by 2.7% in 2030, but this is assuming there is no impact on productivity. However, when the effect on productivity is considered, there is a production loss of 7.8%, which shows that overall productivity decreases. Migration is also linked to productivity because when barriers are removed you get a.