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Abstract
(explain what is FTAs and the number of such agreements are
increasing)
(keywords: free trade agreements
Pros cons benefits drawbacks advantages disadvantages problems
challenges environmental issues threats threaten impacts gains losses
unemployment consequences
1.1 Characteristics
Free trade agreements are signed involving the establishment of free-trade areas or free-trade
zones of each member country to encourage increase activity in the trading of goods and
services between each other along with the advantage in reduction of trade barriers. Such
agreements are increasing as these treaties grants countries the opportunities to focus
comparatively on their main advantages and specialties, to efficiently produce goods to their
best abilities cheaply relative to other countries, and this in turn can bring a surge towards
their profitability and efficiency in each involving country. The North American Free Trade
Agreement (NAFTA) is one of the largest trade agreements signed to date to encourage flow
of trade between North American countries. Even though free trade is established, some
ongoing protectionist policies do exist to protect employment of locals, examples of which
include imposing of tariffs to imports or subsidies to exports, import quotas, taxes, and nontariff barriers.
2. Benefits of FTAs
Under a free trade agreement, each country possesses the opportunity to specialize in the
area of goods they can produce efficiently and cheaply relative to other countries, as each
country vary in terms of their production capabilities due to each countrys own available
resources (eg. natural resources, its peoples and workers levels of technical knowledge,
education, capabilities, physical capital, etc.) This specialization also warrants the ability
for all involving countries to achieve higher real incomes. Total world output will increase
relatively too. Deals are also made easier and good deals may be established between
countries of the treaties. Free trade encourages economic development on a
3. Drawbacks of FTAs
Although free trade agreements opens vast amount of advantages, opportunities
and benefits towards trade, there are also multiple setbacks towards the lack of
trade barriers.
Absence of tariffs on a particular good affects employees and shareholders of a
company or the domestic industry that produces that good. Domestic industries
suffer a loss of profits and market share due to lower prices for imported goods.
An example would be if a country reduces its tariffs on imported flour, domestic
flour producers will have to lower the price of their product and receive less
profit, since end consumers will pay less for the same quantity of flour due to
those same lower prices. David Ricardos theory of Free International trade
supports the above mentioned, where consumers would gain more than
producers would lose (Hebert et.al., 1997)
FTAs also cause considerable sizeable economic costs, however despite that,
trade barriers still continue to exist.
Trade diversion is also an existing problem related to signing of free trade
agreements, which leads to economic inefficiency. In general, a country will
always choose to import goods from the most efficient producer at the cheapest
rate should the same tariff be applied to all countries. In the case of trade
diversion, if a free trade agreement is established, the general rule is not
4. Case Study
5. Items in the Agreement
5.2 Potential Benefits
5.3 Potential Drawbacks
6. Conclusion
7. Beijing Consensus
4.1 The Origin
With the high level architecture of Chrome defined, we are now ready to delve into the various
components and their functionalities, while underlining the ways they interact with one another.
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References
A History of Economic Theory and Method. Robert F. Hbert, Robert B. and Ekelund, Jr., 4th ed.,New York: McGraw-Hill, 1997, pp.
14446.
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What they conveniently ignore is that free trade will make everyone else better off.
It is true that if the U.S. auto industry loses 5,000 jobs to foreign competitors, those 5,000 workers and their
households are worse off. However, the millions of other households that can purchase less expensive,
more efficient vehicles from a wider range of choices, are better off. The pain endured by one of those 5,000
households may well be greater than the benefit enjoyed by any given car-buying household. That is why
labor unions fight so hard to keep their members' jobs. But an economist would argue that if another nation
can make cars more efficiently, those autoworkers should move into another U.S. industry and let the whole
population enjoy the benefits of free trade with the more efficient auto industry of another nation.
Other nations are dumping and don't open their market to us.
compete with imports from France in the States. That created jobs in the United States' wine industryand
in trucking, warehousing, advertising, retailing, and restaurants (thereby employing otherwise unemployable
wine stewards)while combating imports of burgundy and Bordeaux.
We don't want money leaving the country may sound like a sensible argument when you look at the GDP
formula. If we import more than we export, GDP is lowered. Doesn't that mean we are worse off? In a way,
yes, but in a way, no.
The money-leaving-the-country argument goes all the way back to mercantilism, the economic theory that
international trade generates wealth for a nation. The mercantilists believed that exports should be
encouraged, imports should be discouraged, and gold should be hoarded. Mercantilism flourished in the
1600s and 1700s and fueled the worldwide exploration and imperialism of Western European nations in
those centuries. However, as economic theory, mercantilism is dead.
Keeping money in the country is not a priority. We don't want exports to be high because they keep money
in the country but because they fuel domestic production and incomes. If those incomes are spent on
imports, that can be a very good thing for consumers. From the economists' point of view, the way to
promote exports is not by limiting imports. Other nations will retaliate against protectionist policies anyway.
The way to promote exports is to be as innovative, productive, and efficient as we can be.
National security is at stake with regard to some industries. Defense is the best example of an industry that
requires protection on the basis of national security. Steel may be another, but the steel industry has been
only partly successful with this argument. Oil is another industry on which national security can depend,
although U.S. consumption of and dependence on foreign oil has been virtually encouraged by the phase
out of fuel efficiency standards for passenger vehicles and low gasoline taxes (relative to those in Europe).
Although economists disagree about various ways to protect industries on which national security depends,
most agree that some industries warrant such protection. They also agree that some industries that have
claimed this status, such as the American watch industry (I'm serious), probably do not warrant it.
Other nations' unfair treatment of their workers is a relatively new argument against imports, and it can be a
tough argument both to document and deflect. It's hard to document because, as we've learned, everything
is relative. The awful truth is that jobs in sweatshops may enable people in poor nations to feed and cloth
themselves. Limiting imports from these nations may hurt the very people we would be trying to help. These
arguments are hard to deflect because the truth is that low cost foreign production sites often don't meet
reasonable health and safety standards.
Then there is the issue of child labor and forced labor, which virtually everyone sees as highly exploitative.
The U.S. Congress estimates that at least 250 million child laborers between the ages of 5 and 14 are now
working worldwide, about half of them full time. The United States has funded and contributed to a number
of efforts to prevent child labor, and is the world's largest contributor to the International Program for the
Elimination of Child Labor.
Several efforts to have other nations voluntarily comply with guidelines for eliminating child labor are
underway. In fact, the United States devotes some $30 million a year to international programs to end
abusive child labor. In 1999, the United States ratified a new international initiative to eliminate child slavery,
debt bondage, and forced labor. In addition, the Child Labor Deterrence Act was introduced as a bill to the
U.S. Congress in 1999, but it has yet to pass. If it became law, the act would prohibit the importation of
manufactured or mined products produced by children under the age of 15.
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Other nations dumping goods in the United States and keeping our imports out do give protectionists
ammunition in their battle against free trade. Dumping occurs when a nation sells its goods in a foreign
market at a price that is lower than its price in the domestic market or lower than it cost to produce. The
objective is to drive the domestic producer out of the marketand out of businessand then to raise the
price when the domestic competition has gone out of business. Both dumping and protectionism by other
nations can put the United States at a disadvantage.
Under current laws and trade agreements, dumping is illegal. If U.S. producers can prove that dumping is
occurring, special duties can be added to the price of the goods being dumped. One reason that dumping
occurs is that many foreign industries are subsidized by their government in ways that ours are not
(although U.S. agriculture is highly subsidized, as is agriculture in most industrial nations). The steel industry
is a good example of an industry that recently won protection, and in March, 2001, President Bush levied
tariffs of up to 40 percent on certain types of steel imports.
When other countries practice protectionism, the preferred method is to work toward freeor at least fair
trade through a process of negotiation. These processes have been quite useful in recent years and have
brought the world into an age of much freer international trade.
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