They drive the vision and trade policy orientation into liberalism, including Free Trade Area, because trading provides many benefits, such as providing job vacancies that could reduce the number of unemployment. Furthermore, trading helps the producer of products and services obtain resources, especially scarce resources in their countries, provides revenue by exporting, and so on. Nonetheless, the development of free trade policy does not operate excellently, because of the liberalism policy of economy concerning some countries. It has caused some negative impacts, including a discrepancy between developed countries and developing countries especially in this globalization era. Therefore, trade protectionism began to be applied in various countries to minimize the negative impact of international trade.
However, as the economic, social, political situation of nations differ, they set up artificial barriers on trade to protect their own interest. These measurements include tariff barriers, import quotas or non-tariff barriers such as TBT (Technical Barriers to Trade) and SPS (Sanitary Barriers and Phytosanitary Measures. However, trade barriers are known to bring losses to consumer surplus as the trading market is artificially interrupted by government policies. Although keeping a high trade barrier
Disadvantages: Import tariffs limits the domestic country’s competitiveness due to the protectionism of the local industry. Import tariffs has a negative effect on the consumer in that local producers can charge high prices for goods. They also raise trade disputes because high import tariffs imposed on foreign countries allow them to do the same to the domestic country. c) Globalisation - The worldwide movement toward economic, financial, trade, and communications
As a result, it is very important to arrange enough money in order to set up own procedure. Negative impact on exchange rate Negative impact on exchange rate of developing nation as FDI can at times influence trade rates for the advantage of one nation over another. Negative effect on interest in the nation, the standards representing trade rates and direct venture could negatively affect investing nation. The speculation might be precluded in some remote markets, which implies that it is difficult to complete alluring prospects (Keller, 2010). Exploitation of
International trade displays an important role in the economy in every state. It can help developing countries increase current supply and demand. International trade means exchanging goods and services across national borders by transportations. Each country can use limited resources to produce a set of limit products and services to citizens, in this case international trade can import what domestic are lack of and export what domestic are excessive. International trade gives companies an opportunity to open new markets in global and provide a better goods and services choice for people (Wild el al, 2008).
But in a long-run, when trade barriers continue, trade barriers will hurt national economy. One problem that emerges from trade barriers is rent seeking. When local industries tried to lobby the government to give them subsidies or increasing tariff rates to gain more profit, there are no additional value added to the total output thus, there will be wasted resources used for lobbying. This is one example of the inefficiency of trade
Free trade agreements are the agreements with the cooperation between the countries in order to reduce the trade barriers. This would result in an increase in trade between these countries as well as an improvement in the countries’ economy. The significant trade barriers are the import quotas and tariffs. The trade between the countries can occur in both goods and services. Each Trade agreements are different - different scope, different area coverage, different targeted goods and industries, for example.
DRAWBACKS OF INTERNATIONAL TRADING Drawbacks of international trade extent from negative social effects to opposing environmental consequences. Occasionally the well-being of people is overlooked or risked for the sake of return on investment. Other issues related to the exchange of services and goods between countries include a potential unsafe need of foreign countries and local occupation losses. There are social hindrances of international trade. While experience with other cultures can be an advantage, it can also be damaging.
It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. Multinational corporation and foreign direct investment play a large and growing role in shaping the economic of the world. Most foreign direct investment is taken by multinational corporations, who hope to get a lot of benefits. In foreign direct investment, multinational corporations can take advantage of lower labour costs in other countries, they can also take advantage of proximity to raw materials rather than transport them around the world, next they can reduce transport costs, and the most important thing is they can avoid tariff barriers and other non-tariff barriers to trade. That is why nowadays multinational corporations are more beneficial than trade.
The normal value is the comparable price, at which the goods under complaint fare sold, in the ordinary course of trade, in the domestic market of the exporting country or territory. This is an unfair trade practice which can have a distortive effect on international trade as if we import goods at less than normal price from other countries then obviously consumer will prefer goods with lesser price to cut its input’s cost and thus will try to increase its profits. . Thus Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. The use of the Anti Dumping Measures is permitted by the WTO as an instrument of fair competition.