Are you referring to a free trade agreement here, or trade liberalisation?
A free trade agreement is when countries place no restrictions on imports from partners, but they can each impose thier own restrictions individually on imports from countries out side of the free trade area.
Trade liberalisation however, refers to the attempt to reduce barriers to trade, such as protectionist policies like tariffs, quotas, and embargos.
The first advantage of trade liberalisation, is that it encourages countries to focus on what they do best, in order to create the maximum increace in the import strand of thier balance of trade. This will increace the countries GDP.
They do this by exploiting comparitive and absolute advantages, which will lead to specialisation.
Specialising on one industry can be dangerous. For example local banana producers are now struggling to compete with three large multinationals, as they cannot exploite the same economies of scale.
Also, vietnam focused too much on thier production of coffee,leading to supply outweighing demand. This meant that the market clearing price decreased. Their bargaining powers were further reduced by trading with global oligopolies like Nestle.
Exploiting comparitive and absolute advantages do however lead to a net well fair gain, as efficiency will be increased when examining the global total. If efficiency is increased, factors of production can be freed up and allocated else where.
Liberalisation, creating a gloabal market has led to an increased number of multi nationals. The main concern is that they can be difficult for Goverments to control, as they often contribute substaintial amounts to GDP, as well as creating jobs and speeding up the transferance of skills from developed economies, to developing economies.
It can be good to extend product life cycles, for some businesses, by launching items into alternative markets. It also gives those consumers access to new products.
The biggest drawbacks are a) the environmental damage of transporting these goods, and b) the growing dominance of multi nationals. Due to the economies of scale they can exploite, many smaller businesses can no longer compete. As more duopolies and oligopolies emerge in the market, it could be argued that consumer choice will be decreased (see porters five forces)
However the two main benefits are a) its bring people out of poverty. For example 1981 in the East Asia and specific region, when trade was just begining, there were 57.7% of people living on less than $1 per day. In 2002 there were just 11.1% of people.
However in contrast, benefits of trade arent always going to be shared equally. Over the same time period sub saharan africa saw thier figures go from 41.7% to 44%.
But the net gain still supports trade and b) Its giving consumers access to items they wouldnt previously have had, be it tropical fruits, or advanced medicines.
Let me know if thats any help!
A free trade agreement is when countries place no restrictions on imports from partners, but they can each impose thier own restrictions individually on imports from countries out side of the free trade area.
Trade liberalisation however, refers to the attempt to reduce barriers to trade, such as protectionist policies like tariffs, quotas, and embargos.
The first advantage of trade liberalisation, is that it encourages countries to focus on what they do best, in order to create the maximum increace in the import strand of thier balance of trade. This will increace the countries GDP.
They do this by exploiting comparitive and absolute advantages, which will lead to specialisation.
Specialising on one industry can be dangerous. For example local banana producers are now struggling to compete with three large multinationals, as they cannot exploite the same economies of scale.
Also, vietnam focused too much on thier production of coffee,leading to supply outweighing demand. This meant that the market clearing price decreased. Their bargaining powers were further reduced by trading with global oligopolies like Nestle.
Exploiting comparitive and absolute advantages do however lead to a net well fair gain, as efficiency will be increased when examining the global total. If efficiency is increased, factors of production can be freed up and allocated else where.
Liberalisation, creating a gloabal market has led to an increased number of multi nationals. The main concern is that they can be difficult for Goverments to control, as they often contribute substaintial amounts to GDP, as well as creating jobs and speeding up the transferance of skills from developed economies, to developing economies.
It can be good to extend product life cycles, for some businesses, by launching items into alternative markets. It also gives those consumers access to new products.
The biggest drawbacks are a) the environmental damage of transporting these goods, and b) the growing dominance of multi nationals. Due to the economies of scale they can exploite, many smaller businesses can no longer compete. As more duopolies and oligopolies emerge in the market, it could be argued that consumer choice will be decreased (see porters five forces)
However the two main benefits are a) its bring people out of poverty. For example 1981 in the East Asia and specific region, when trade was just begining, there were 57.7% of people living on less than $1 per day. In 2002 there were just 11.1% of people.
However in contrast, benefits of trade arent always going to be shared equally. Over the same time period sub saharan africa saw thier figures go from 41.7% to 44%.
But the net gain still supports trade and b) Its giving consumers access to items they wouldnt previously have had, be it tropical fruits, or advanced medicines.
Let me know if thats any help!
