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.
Some market participants have faster computers, better algorithms, smarter staffs and work for businesses that transact with investment banks that will offer favorable allocations in Initial Public Offering’s because they are better clients. In life, someone will always have the upper hand somewhere. The large investors thrive on information asymmetry, so eliminating the insider trading laws will likely affect those major market players. Insider trading is a victimless act. So how is it a crime when there is no victim?
The advantages of free trade can be seen through domestic markets and the growth of the world economy. T... ... middle of paper ... ...ystem primarily responsible for promoting global competition. Free trade also promotes shifts in production so as to fit the “comparative advantage” model. Though free trade is widely practiced concerns with how to regulate free trade, something supposedly unregulated, countries have to subject themselves to the controversial institutions of the IMF and WTO. Fair trade policies while potentially creating smaller markets support workers’ rights in both the U.S. and developing nations.
Essential issues that would be tackled include poverty, inequality and unethical business practice. Just like any other system it is bound to possess faults and fissures along the way but it undoubtedly beats the alternative and the outcome that is expected to promote the investments in research, development, and job training in new industries would be one hundred percent worth it. The main idea of Fair Trade is that it would not oppose nor contradict the definition of Free Trade but develop ways to fix the flaws in the system. Ultimately, the policy would strive to reduce tariffs on imported goods which would make it easier for the recipient to extend their range of commodities. Having a larger range of goods purchased would usher better business to the particular manufacturer.
Protectionism – It is the government actions and procedures that restrict particular bases of international trade, it is to develop industries and firms domestically by protecting them from other nation competitors through tariffs, quotas, subsidies imposed on the trade whereby they import products. There are several advantages of protectionism in a nation likewise protectionism helps a nations trade to be restricted the unwanted goods and helps them increase in the total revenue of a nation’s economy. It also increases jobs for domestic workers as it is protected by several kinds such as tariff, quotas and subsidies. Protectionism keeps the domestic economy of a region flowing as in it decreases the number of exports and increases the revenue of an economy and has an increment is the total gross domestic product as firms will be more efficient in building their own products. Protectionism allows the domestic firms to fix price decently rather than competitive pricing at a high price where consumers cannot afford to buy as there are no rivalries / competitors from outside nation to compete.
Capacity constraint is another factor because in a competition situation, it is difficult for companies to produce at monopoly output. Therefore, to increase the output, collusion is necessary to supply monopoly output and that leads to higher profit for the firm. Information about rival’s price is also another facilitator because if the firm is able to gain access to its rivals price information, this makes it easier for the firm to monitor the rival to make sure that they follow through with the agreement of the price and output. If the firm deviates from the cartel, then other firms can punish them. Therefore access to rival’s information allows the cartel to function stably.
The question arises whether the WTO truly enforces justice and serve its purpose of effectively reducing tariffs equally for all countries, as well as abide by healthy and fair and regulations that prevent conflict and biasness, or does the WTO still base trade on the utility of developed countries/parties? Free Trade Regulating international trade to be free from tariffs, the WTO helps rich countries such as China to benefit greatly through exporting products, but deeply harms poor-developing countries that receive those products. Initially, tariffs were expensive and raised the ... ... middle of paper ... ...ve the contrary. First, developed countries that use agricultural subsides must be taxed so the final prices of their products will be more expensive than those of the domestic products in developing countries. This will allow those farmers in developing countries to sell their products at a higher price, giving them profit and eventually be able to make a living for them and their families.
Tariff and Non-Tariff Barriers Tariff and non-tariff effect global financing operations by having an impact on whether countries will build and invest in companies in the home country. If an organization wants to build a company that imports raw material that has a tariff on it, it would make the product considerably more expensive to produce and export. Tariffs do benefit the government by increasing the revenue and also benefit home-based businesses by decreasing foreign competition. The tariff also helps protect jobs in the industry that has eliminated the foreign competition but a negative impact is felt because it causes the consumer to pay more for a product that is imported (Hill, 2004). If a country it prone to levy tariffs on items that an organization may need, it would increase the risk of doing business while located in that company.
As a consequence cheaper imports from non partners country may be replaced by expensive imports from a better country. In that case, it allows free trade between members while restricting imports from outside countries. 9 – Redundancies As competition is often tougher when the customs union is implemented, regional trade agreements may entail rounds of redundancies. The opening of markets led to much restructuring and downsizing due to foreign competition. Eventually, forming a trade bloc is a step toward free trade as it simplifies exchanges, as it boosts the economies of the poorest countries of the agreement and because it lowers prices by raising competition.
Effects of industrial regulation to the market: The market reacts differently depending on the goal of the regulatory goals and objectives. If the aim was to protect the consumer by preventing the traders from hiking prices, then the traders might reiterate by reducing the level of production and thus creating a shortage. This usually happens if the producers and the traders were not necessarily making huge profits If the regulations were put in place after an agreement between the various players in the market, then it will be accepted. As a result products will be sold in a fair and reasonable price hence increasing their demand. Consequently the producers will produce more to satisfy the huge mar... ... middle of paper ... ...commissions includes: bureau of alcohol and tobacco, and fire arms which regulate abuse and misuse of the substances; equal employment commission which ensures the employment process is not biased; federal highway administration which ensures proper maintenance and good conduct on the highways; federal maritime commission which promotes safety in water travel; and federal election commission which promotes free and fair elections (Wikinvest).