FREE TRADE

Free Trade



Free Trade

Introduction

The Free Trade Agreement

A free trade agreement is a binding trade agreement signed two or more countries to agree on mutual granting of tariff preferences and reducing non-tariff barriers to trade in goods and services. In order to deepen the economic integration of the three countries, an FTA in addition to issues of access to new markets, other regulatory aspects related to trade, such as intellectual property, investments, policies, competition, financial services, telecommunications, electronic commerce , labor and environmental provisions, and trade defense mechanisms and dispute settlement (Held 2007, p. 90).

The TLC has an indefinite term, i.e., remain in effect throughout the time so I have the character of perpetuity.

Discussion

Why Is It Important To Sign Free Trade?

The free trade agreements are part of a long-term business strategy that seeks to consolidate markets for Peruvian products in order to develop a competitive export supply, which in turn generate more and better jobs (Krishna 1999, p. 92).

What can be the Disadvantages of Free Trade?

However, the negative effects on certain products can also be reduced if appropriate measures are taken to boost their competitiveness or at least encourage their conversion to activities with higher growth potential.

There are many and can be of any kind, if you look at the disadvantages for a country's domestic prices more expensive than outside:

The country's domestic market will be flooded in a matter of goods and services from abroad, depending on the magnitude of the differential and inflation that blends a bit of this effect, which reduces the domestic industry and the problems arising from this (trade deficit: Imports increased exports are reduced, may increase unemployment, increase the country's dependence on the outside)

If in addition it is a country belonging to a European Monetary Union as another disadvantage will be that the weapons to combat this problem is reduced, because you can not devalue the currency.

Job losses in rich countries

The stiff competition will force some companies to put the key under the door. There will be job losses, huge in some cases (Brakman 2006, p. 127).

Downside risks to growth

If job losses are significant, the demand for products and services will fall. So, economic growth, which depends, will drop too.

Questioning of social workers

If the social gains such as minimum wage or health plans increase the cost of labor (thus reducing the competitiveness of the country), companies will reduce or relocate their production to other countries cheaper.

Weak competitiveness and external constraint

The growth generates comparative advantages (Krugman theory) - poor countries are penalized. In the same vein, the threshold effect penalizes those countries to innovate in their international specialization (cf. endogenous growth theory).

Exchange unequal: the savings are not on equal terms - report of power and domination.

Loss of independence because some economies can not do without imports, as the leading countries impose a DIT that advantage because multinationals impose their rules on small countries (tax benefits, social), as imports rise the disappearance of local ...