1) Discuss the advantage and disadvantages of free international trade ADVANTAGES Increased Production The reason for exchange is to give access to a more amazing variety of products and services. As stated by the Heritage Foundation, free trade fosters rivalry, impelling organizations to enhance and create better products keeping the costs low and high quality. Free trade permits organizations to concentrate on the merchandise or services that they do best. International trade builds a companies market share. As a result of which cost is decreased and the productivity is increased, prompting higher rates of production.
I. Introduction In today’s environment more and more B2B companies are became international, because they want to be compete in an increasingly global marketplace. So that will increase their profitability in ways not available to simply domestic enterprises. With addition region of operations, comes the challenge of managing business operations in multiple countries and that coordinating company’s marketing activities in more than one nation. However, for many marketers selling products and services in their own country is easy when compared to the efforts needed to gain sales in other countries.
The easing or eradication of these restrictions is often referred to as promoting "free trade." Component of liberalization include • Industrial Liberalization • Trade Liberalization • Financial Liberalization • Fiscal Sector Reform Positive impact of liberalization to insurance sector Foreign insurance companies can improve the efficiency of local insurance markets by providing superior customer services, introducing to new products and transfer technological and managerial know-how. Liberalization increases competition between company and encourages a more prominent specialty according to comparative advantages. Role of foreign participation in promoting financial stability are important. it is also authoritative to facilitating the trade and commerce of developing economies.
Globalization is great for the American economy; we can supply the world with our goods and services, which in turn can possible, relieve the deficit we’re in. “Homegrown industries see trade barriers fall and have access to a much wider international market. The growth this generates allows companies to develop new technologies and produce new products and services.” (Buzzle) Also, globalization leads to better relations between countries when they create trade agreements. Globalization does not drain every under-developed company but brings a new era of economic change and the hope of being a world super power to certain nations. “Economic globalization gives governments of developing nation’s access to foreign lending.
Benefits of international trade Trading internationally provides businesses an opportunity to expand their activities to the overseas market s providing them with higher sales volumes which in turn means higher profits for businesses. Another benefit of international trade is improvement of organization’s ability to compete within its domestic and foreign markets due to increased awareness of current trends in product quality, packaging, product’s design and development. Businesses also can take an advantage of inability to produce some products locally to engage in import operations. This can be reached if its cheaper to import product to country instead of producing it locally. Moreover, businesses can try to export products and services which have not been much popular within its borders.
Trading goods like: oil, jewelries, foods, clothes, machines, etc.…. Services like: banking, tourism, internet and communication, transportation, and etc. selling a product to the global market is exporting that product, buying that product from a global market is importing that product to the country. A country can export goods when supply of that good is greater than the demand, in that case it can sell it to other countries, a country also needs to import when demand for a good is greater than the supply of that good. International Trade can increase efficiency of countries they deal with (trade), it also allows them to have comparative or/and absolute advantage.
As trade has consistently grown faster than GDP and has been an important driver of world growth the relationships with international countries are necessary. A way in which to build the association between counties is to create a trade partnership that is mutually beneficially for all of the parties involved. A method that can create the mutually beneficial partnership is to allow for the economic and trade openness but introduce a local content requirement on international goods. Local content requirements oblige firms manufacturing a good in a country to procure a specific minimum proportion of intermediate inputs domestically (Belderbos, Jie-A-Joen, & Sleuwaegen, 2002). Local content requirements may have favorable effects on the production of the intermediate sector, unemployment, and welfare (Yabuuchi, 2003).
Companies who provide cheaper made products, can cause a deficit for any country by flooding their economy with these exports. Fair trade prevent this and provides developing countries with the opportunity to provide merchandise that is not readily provided to the consumer. Fair trade helps provides jobs in developing countries and protect them from the abuses of monopolization. To solve this problem, there must be a fair exchange for goods and services. If these practices are allowed to continue, we as the consumer, will be paying higher prices at the stores.
As one of advantages, the benefits of the national tax system of some countries may be a kind of resource as useful as cheap labor or a mineral deposit, which attract business from all corners of the earth. This is especially useful for the mobile types of commerce, such as international trade and finance. While constructing scheme of work international business always takes into consideration the tax attractiveness of countries, where it will act. Moreover, in certain cases, tax considerations play a decisive role for the choice of activities of various departments of the company. It happens, that the corporation completely rebuilds its global structure based on tax considerations.
The decline in trade and investment barriers has enabled the international business to growth further. Once a business exports/imports goods from other countries or commits to FDI, it becomes an international business. Lowering trade and investment barriers are characteristics of international business. This allows growth in FDI and moves towards regional economic integration. The advantages of the political driver on international businesses include; the diverse variety of goods available to consumers through the new trade theory, low prices, economic growth and competitive advantages.