The Changing Business Environment : Free Trade

Discuss about The Changing Business Environment for Free Trade.

This essay aims to discuss about Free Trade Agreements (FTAs), more specifically on the Pacer Plus (Pacific Agreement on closer Economics Economic Relations) that has been signed few days back in New Zealand despite being boycotted by the Fiji and Papua New Guinea who refused some of the terms. Free Trade Agreements are concerned with the regulation of tariffs as well as other restrictions of trade among two or more nations. They are made when two or more countries concur on the terms of trade among them and require cooperation. They determine the taxes and duties that are imposed by the countries on exports and imports. In the essay, a discussion regarding the generation of a wide criticism with respect to the Trans-pacific partnership will be made. In addition, the essay will also discuss the pros and cons of Free Trade Agreement and the reason behind its opposition.

This section of the essay will discuss on The Pacific Agreement on Closer Economic Relations, which  is an agreement on the trade as well as fiscal integration.  The key aims of this agreement include raising the living standards, offering job opportunities and encouraging sustainable economic growth in the pacific region (Lester, Mercurio & Bartels, 2016).  This agreement has been made between the members of the “Pacific Islands Forum.”, which constitute the Forum island countries together with New Zealand and Australia (Lester, Mercurio & Bartels, 2016). A framework has been provided by this agreement for the future growth of cooperation of trade (Baldwin  & Jaimovich, 2012).  This agreement was initially signed on 18 August in the 2001 at Nauru and came into existence on 3 October in the year 2002 (Berger et al., 2013).  It comprises a Regional Trade Facilitation Programme for improving the competence of trading of Pacific Island Countries (Ravenhill, 2014). 

 This section of the essay will discuss The Trans-pacific Partnership (TPP), which is an agreement of trade between 12 Pacific Rim Countries, except China (Berger et al., 2013).It was signed this year on 4 February in New Zealand, Auckland after seven years of discussions (Lim, Elms & Low, 2012).  At present, it is awaiting approval for entering into force (Lester, Mercurio & Bartels, 2016).  It aims for promoting financial growth, supporting the opportunities of jobs along with retention, good governance enhancing novelty, efficiency and competitiveness, raising the standards of living, reducing poverty in the participant countries and encourage transparency (McGovern, 2016).  In addition, it also aims for protecting the environment (Aggarwal & Urata, 2013). The Trans-pacific partnership has generated wide criticism because of domestic opposition, which has been vigorous and had been mainly criticized by the observers who are well informed and and they have warned that this deal of trade is not quite simple (Baldwin  & Jaimovich, 2012).   The provisions of the agreement for the resolution of disputes as well as the standards certainly make it the the foremost agreement of its type (Ravenhill, 2014).  In addition, they were worried regarding the ambitious scope of this agreement that could consent to the critics who have a fear in their mind that the participants risks their independence for satisfying the interests (Aggarwal & Urata, 2013).  A more intricate agreement is needed for addressing the the issue that are more obstinate e.g. regulations which aim for protecting the domestic industries (Baldwin & Jaimovich, 2012). However, it has been identified by the critics that the ambition of this agreement goes ahead of trade (Lester, Mercurio & Bartels, 2016).  It is evident that that all the deals of trade are fundamentally political, but this agreement is clearly so it involves an effort for the advance standards concerning intellectual property, environmental protection, government procurement, labor rights and enterprises that have been owned by the government (Baldwin  & Jaimovich, 2012).  

The FTAs have been opposed due to a number of reasons such as these agreements are being written without taking into consideration the input of the citizens (Aggarwal & Urata, 2013).   In spite of the repetitive calls for the open as well as democratic trade development policy, the negotiations of FTAs have been carried out without the input of the citizen. The opponents of FTAs think these agreements will challenge the labor rights and could lead to loss of employment. According to the protestors, they will lead to the exacerbation of destruction of environment. The family farmers can be hurt by these agreements. It can also result in privatization of the necessary services. In addition, these agreements can also put at risk the protections of consumers and the environment. They can also lead to the extended utilization of genetically modified organisms (GMOs). Besides that, these agreements can increase inequality as well as poverty (Baldwin  & Jaimovich, 2012). Ironically, it has been said by a number of critics that this agreement does not have an extended scope, for instance, through dealing with the concerns over manipulation of currency (Lester, Mercurio & Bartels, 2016). These factors would counteract the positive effects that will result due to the reduction of the barriers of trade (Morgan, 2014).

This section of the essay will discuss the pros and cons of the Free Trade Agreements (FTAs). At first, the pros of the Free Trade Agreements will be discussed. The FTAs increases the economic growth of the countries, as for e.g. it has been estimated by The U.S. Trade Representative office that North American Free Trade Agreement (NAFTA) has increased the economic growth of U.S. by 0.5% in a year (Aggarwal & Urata, 2013).   The FTAs offers a more dynamic environment of business (Lester, Mercurio & Bartels, 2016).   They prevent the local industries from the risk to become stagnant as well as non-competitive in context to the worldwide market (McGovern, 2016).   The agreements motive them for becoming an active competitor globally (Berger et al., 2013).  The FTAs helps in reducing the expenditure of the government, for e.g. the subsidization of the segments of a local industry has been subsidized by several governments (Baldwin  & Jaimovich, 2012). When they are removing prior to the agreement of trade, then the finds can be used in a better way (Morgan, 2014). The FTAs helps to invest directly on the foreign trade. In addition, it also brings finance for several countries that have been isolated in earlier times (Lester, Mercurio & Bartels, 2016).  They help the global organizations in gaining expertise for developing their local resources particularly in manufacturing, oil drilling and mining (Baldwin  & Jaimovich, 2012).  The FTAs also assist in transferring technology as it facilitates the local companies for getting an access to the most recent technology and the practices of business from their for foreign associates (Dür, Baccini & Elsig, 2014). The consumers get a variety of options and get advantages resulting from the lower prices (Berger et al., 2013). They also create the opportunities of employment, as it is evident from the fact that the benefit of free trade promotes the import of products from the foreign countries (Bown & Crowley, 2013).  It has also been observed that the expansion of global market increases the demands for the products and the services. As a result of this, additional work force is essential for ensuring the delivery and therefore there is an availability of more jobs for the individuals (Hafner-Burton, 2013).  According to the supporters of FTAs, the financial system of the trading countries become affluent with respect to the kind of trade agreement shared among them (Lester, Mercurio & Bartels, 2016). 

One of the biggest disadvantages of FTAs is that they are accountable for outsourcing of jobs (Antràs & Staiger, 2012). It is evident since the reduction of taxes on imports facilitates the foreign organizations for expanding and hiring human resources (Kelton, 2013).  It becomes difficult for the foreign countries in terms of low-cost imports for competing with the other countries (Baier, Bergstrand & Feng, 2014).  Several manufacturing companies that cannot compete with the other companies lose business and in addition dismiss their employees due to FTAs. The second disadvantage includes the theft of intellectual property as several developing countries do not possess the similar protection for novel processes, inventions and patents. The companies that are benefitted from the FTAs frequently encounter the stealing of ideas. Besides this, FTAs displace the domestic industries. In addition, it also leads towards poor conditions of working, reduces revenue of tax, degrade the natural resources, and the destruction the cultures that are native (Mercurio, 2014).

In the end, it can be concluded that Free Trade Agreements (FTAs) has advantages as well as drawbacks since several countries have benefitted by them, and a number of countries strongly oppose it. If the progress of the countries is taken into consideration, then FTAs, are beneficial as they enhance the economic development of the countries. They protect the local industries from becoming non-competitive in terms of the global market  They also help in lowering the spending of the government. They help the global organizations in gaining expertise for developing their local resources and also assist in transferring technology as it facilitates the local companies for getting an access to the most recent technology and the practices of business from their for foreign associates. However, they do have some drawbacks but the the countries, particularly the developing nations should get benefit from it in an efficient manner.

References

Aggarwal, V., & Urata, S. (2013). Bilateral Trade Agreements in the Asia-Pacific: Origins, Evolution, and Implications. Routledge.

Antràs, P., & Staiger, R. W. (2012). Offshoring and the role of trade agreements. The American Economic Review, 102(7), 3140-3183.

Baier, S. L., Bergstrand, J. H., & Feng, M. (2014). Economic integration agreements and the margins of international trade. Journal of International Economics, 93(2), 339-350.

Baldwin, R., & Jaimovich, D. (2012). Are free trade agreements contagious?.Journal of international Economics, 88(1), 1-16.

Berger, A., Busse, M., Nunnenkamp, P., & Roy, M. (2013). Do trade and investment agreements lead to more FDI? Accounting for key provisions inside the black box. International Economics and Economic Policy, 10(2), 247-275.

Bown, C. P., & Crowley, M. A. (2013). Self-enforcing trade agreements: evidence from time-varying trade policy. The American Economic Review,103(2), 1071-1090.

Cooper, W. H. (2014). Free trade agreements: Impact on US trade and implications for US trade policy. Current Politics and Economics of the United States, Canada and Mexico, 16(3), 425.

Dür, A., Baccini, L., & Elsig, M. (2014). The design of international trade agreements: Introducing a new dataset. The Review of International Organizations, 9(3), 353-375.

Hafner-Burton, E. M. (2013). Forced to be good: Why trade agreements boost human rights. Cornell University Press.

Kelton, M. (2013). Symposium: Australia–US Economic Relations and the Regional Balance of Power Australia–US Economic Relations following the 2005 Free Trade Agreement. Australian Journal of Political Science, 48(2), 208-220.

Lester, S., Mercurio, B., & Bartels, L. (Eds.). (2016). Bilateral and regional trade agreements: Commentary and analysis (Vol. 1). Cambridge University Press.

Lim, C. L., Elms, D. K., & Low, P. (Eds.). (2012). The trans-pacific partnership: a quest for a twenty-first century trade agreement. Cambridge University Press.

Magee, C. S. (2016). Trade creation, trade diversion, and the general equilibrium effects of regional trade agreements: a study of the European Community–Turkey customs union. Review of World Economics, 152(2), 383-399.

McGovern, E. (2016). International trade regulation (Vol. 2). Globefield Press.

Mercurio, B. (2014). The Trans?Pacific Partnership: Suddenly a ‘Game Changer’. The World Economy, 37(11), 1558-1574.

Morgan, W. (2014). Trade Negotiations and Regional Economic Integration in the Pacific Islands Forum. Asia & the Pacific Policy Studies, 1(2), 325-336.

Ravenhill, J. (2014). Global political economy. Oxford University Press.