What is the role of free trade within successful economic policy?
It is important to accentuate that Free Trade has opened doors for competition and perpetual innovation in the market. This also leads to high quality of products and increase in investments in a particular region due to open freedom to trade with less barriers in the market. Virtually, Free Trade allows citizens to access particular products or goods at a lower price. As such, the living standards of an individual is not constrained. This makes the nation to purchase voluminous product from different nations at a lower rate and thereby saving the country a great deal. Similarly, for success country, the free trade enhances a country’s relationship with the neighboring country in which free trade is viable. Moreover, freedom is heightened and thereby this allows poor countries to grow economically as they can be able to either export or even import goods at lower rate and thereby bettering them economically (El-Agraa, 2014). For instance taking a god example of US economy, it is clear that in 1990, the GDP of the said country rose incredibly by 23%. This was appositive deviation for the nation’s growth of economy that amounted to $2.1 trillion. The major breakthrough was evident in the signing of North American Free Trade Agreement (NAFTA) that saw the realization of World Trade Organization (WTO) in 1993. From 1990, it has been clear that importation of goods has risen to 115%. Moreover, the number of job creation most especially the full time jobs has risen to 13.4 by 1991. This is a clear indication of the positive role that free trade has played in the economy of USA (Cavusgil, Knight, Riesenberger, Rammal & Rose, 2015). Therefore, its role cannot be understated due to the multiple benefits that are evinced in the country. This also reduced the instances of unemployment level as most people are much engaged due to Free Trade. Ideally, this means that different opportunities have been made available and thereby the country’s population are engaged in productive business by present or making their produce available in the market. Most of the policymakers currently support free trade more than before.
Pride and Ferrell (2014) assert that free trade has been seen to promote democracy. It is important to state that democracy is enhanced as the consumers and traders are given goodwill to provide their products to the international market a situation that removes much restraints in trading activities. A lot of restraints in business has been seen as a factor that hinders freedom of goods from one location to another due to much restriction that has been created. Free trade also fosters peace among the Trading members in that particular bloc. This is heightened when two or more countries come together and do productive business (Pride & Ferrell, 2014). On the same breathe, it lessens animosity and difference between the trading nation as they get to understand more about each other and thereby create positive platform for tem top build on their relationship. This also reduces trade barriers and thus allowing the business personnel or traders produce their products at reasonable prices a fact that allows the consumer to purchase such goods at fair prices and saving them great deal. This in turn works positively for the advantage of consumer which later on build on their living standards as the prices of the products are not unrealistic or exorbitant. In spite of this, USA has imposed tariffs and quotas to developing countries and most importantly on textile and agricultural industry. This has made it difficult for consumer from developing countries to purchase this commodities at relatively fair prices.
According to Saurombe and Nkabinde (2013), Free Trade offers consumer variability of opportunity to acquire goods and services required. This allows the citizens of the said country to be innovative due to stiff competition that has been posed by the said members of the bloc. It is important to state that the integration of member state enables one country to learn more of what ought to be initiated in the market. As such, this creates an opportunity for the member state to innovate what is lacking in the market and thereby offering an array of products to t market different from the ones presented by other member states. It also fosters competition. This makes the country to be innovative and generate better products to the market. On the same breathe, the process of the said product would be kept low and at the same time having improved quality. It is common knowledge to accentuate that stiff competition makes to the member states to innovate different products in the market so as to stand out uniquely and increase on their sales due to their uniqueness (Saurombe & Nkabinde, 2013). Ideally, America solely rely on innovations and this is the reason why one would see the nation coming up with new item or products in the market. What spurs this innovation is the stiff competition that is eminent in the market and most especially the one that is clearly brought about by free trade. Employment rate has also gone up due to increase rate of innovation which makes some individual to be self-reliant and other are employed in different firms that has risen due to innovations.
World Trade Organization has been seen to honor its member states agreement. This is a clear indication that Free Trade builds clear understanding by different member states towards the democratic rights of every country and thereby providing healthy working environment for its members. Moreover, free trade supports rule of law. This implies that the member states are obliged to observe the statutory policies that have been highlighted under their framework policies. This in turn makes the nation reduces chances of being at loggerheads or entropy in their bloc. As such mutuality is built for better understanding and cordial working relationship. Moreover, when different countries are allowed to interact effectively due to this reduced restrictions, they are at better place to understand why other countries are performing well economically (Krugman, Obstfeld & Melitz, 2015). This allows such countries to reduce cases of corruption in their country as they would learn that for sustainability of the nation, obliteration of corruption in the nation’s key element. It is prudent to state that most of the developed nation have low levels of corruption. Through free trade, the developing nation get an opportunity to learn more from those flourishing nations in terms of economic sustainability. They get to understand proper strategies that have been laid down by those countries to realize positive deviation in their economy which culminates to better living standards in their nation. Free trade also spurs economic growth as the nations are able to compete positively in the market in the view of improving on their economic status. Due to reduced tariffs and other barriers the nation is able to either export or import a product at a reduced rate and thereby advantaging the nation in terms of the economy. To add on this, freedom is also heightened. The member states are able to interact freely and borrow some a leaf from others a fact that would enable the member states to understand each other well and reduce animosity that had earlier existed amongst the nations due to some misconceptions or stereotype that had been created amongst the member states. Culture freedom is also heightened for that case.
Free Trade has greatly opened the doors for increased opportunities for trading. Different individuals from different nations are able to bring their product to this international market for sale due to reduced restrictions. This will enable those individuals to easily export or import a particular product in the market (Negishi, 2014). Countries affiliated to UK that is Hong Kong, Singapore, New Zealand, US and Australia have employed the capitalist approach. This has seen such countries grow on their economic status putting them on better platform for economic growth and sustainable performance of their nations. It is important to also indicate that free trade fosters economic growth of the nations. This case is evident where there is equal opportunity for both the poor and wealthy nations. The poor nations are given opportunity to trade their goods at reasonable price and thereby according them readily available market. It is interesting to note that most of the nations that are considered poor are not very poor as such. The said nations only lack to get the readily available market for their produce (Krugman, Obstfeld & Melitz, 2015). According to David Dollar the economist of the World Bank, he clearly states that the paucity experienced in most of the developing nations is due to restrictions evidenced in the market denying them an opportunity to trade their goods freely to the international market. However, Dollar emphases the need for equity in the market where door would be opened for this developing nations to freely trade at the European nation and as such, the poor nations too would incredibly benefit. It is incumbent to note that due to note that Free Trade also allows for free flow of ideas into the nation opening an opportunity for them to innovate product that would be useful to the market. However, the protectionist policies implemented in parts of the developed country has made it difficult for some nations to acquire goods at a fair price. European Union protects its consumers on agricultural products from foreign nations. Such policies restricts imports of beef and that of banana mostly in USA where this policy is followed to the latter.
Brenton (2015) accentuates that free trade influences the economic growth of the nation. This also increases sales and market share which eventually enables a country to stand a better chance economically. Interestingly, the country is offered a platform to expand their market. Due to wide market created, a nation is able to export its surplus without much restrictions and eventually the nation would get reasonable revenue that is geared towards the developmental issues of the nation. It also allows any company to freely enter the market with ease due to free trade which ultimately allow free movement within the region (Mansfield, 2015). Nonetheless, opponents of this believe that it my result incredible lose in manufacturing industry. On the contrary side, researches conducted in different states indicate that NAFTAs operations results to great benefits to nations operating under the same bloc as America that is Canada and Mexico (Brenton (2015). This operations has resulted to creation of 14 million jobs in America. Most of the job opportunities have increased due to the free trade that was legislated in America to allow its citizens to trade freely with other European nations such as Australia and the rest. Notably, unemployment rate has also reduce from 6 to 3 % by the year 2000. This has also led low taxation a situation that has been seen to benefit most of the consumers as they purchase goods at a fair price thereby not straining much financially. The free trading has also made the environment to be friendly and thereby the nation are able to build on their relationship through this platform. It has also opened forum for democracy and for one to assess the country sustainability in the market.
Conclusion
The cause of paucity in Sub Saharan region is due to lack of economic freedom. If this nations are allowed an opportunity to trade freely with the European nations, there is higher likelihood of such nations growing economically and stop depending on grants and aids from humanitarian support. Therefore, there is need for the EU laws to be revised in order to accommodate the said nations in trading Removal of barrier such as tariffs and quota system would see to it that most of ta nations trade freely with reduced charges of both imported and exported goods.
References
Brenton, P. (2015). International trade, distribution an development: empirical studies of trade policies. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=886699.
Cavusgil, S. T., Knight, G. A., Riesenberger, J. R., RAMMAL, H. G., & ROSE, E. L. (2015). International business: the new realities.
EL-AGRAA, A. M. (2014). International Trade. Palgrave Macmillan.
Krugman, P. R., Obstfeld, M., & MELITZ, M. J. (2015). International trade: theory and policy.
Mansfield, E. D. (2015). The political economy of international trade.
Negishi, T. (2014). Developments of international trade theory. https://dx.doi.org/10.1007/978-4-431-54433-3.
PRIDE, W. M., & Ferrell, O. C. (2014). Foundations of marketing.
Saurombe, A., & Nkabinde, H. (2013). Reforming the multilateral decision-making mechanism of the WTO: what is the role of emerging economies? Potchefstroom Electronic Law Journal. 16, 431-456.
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