Free trade is a policy formed by the international market in which the government of a particular country does not put a restriction on the imports or exports from individual countries. Many countries tend to restrict other countries from doing business with them due to several reasons. Such actions can have a negative economic impact on a certain country since it is mostly likely that the country cannot be able to sustain itself. Free trade is mostly exemplified by European Economic area and the North American Free trade agreement. Members of World trade organizations know most of such nations currently. However, most governments are known to employ strict measures from other countries to import their products. Such restrictions can be inform of tariffs to subsidise exports. This paper will discuss if free trade beneficial only if a country is more productive its trade partners by looking at Mexico and India.
It is not true that free trade profitable only if a country is more productive than its trade partners. Free trade ensures that all the countries benefit significantly by conducting business together. Mexico and India have signed numerous bilateral trade agreements that have allowed both countries to conduct free trade. Some of the agree cultural agreement, air services agreement, an extradition treaty, and scientific and technician cooperation. There are several advantages that Mexico and India tend to benefit from the signed agreement, which ensures both countries have free trade. One of the advantages is that there are no taxes to such products and services. In most cases, the kind of taxes imposed on certain goods will either impact negatively or positively. It can scare away potential investors since their main aim is to make as much profit as possible. By reducing the taxes of the products, both Mexico and India will have products that are of reduced prices. When the government increases the taxes on certain goods and services, it will likely affect the cost of those products. This will result in consumers paying more money for them to benefit from those imports or exports. The two countries will only have to incur the transportation cost, which may be reflected on the consumers. Innovations are likely to increase when there is free trade between Mexico and India. This is because the introduction of more exports products will increase competition for certain types of commodities. The only way for the existing firms to survive such competition is by coming up with better products than those of the foreign countries. The consumers are likely to benefit from this aspect since they will have products, which are of higher quality. This is one reason that most countries try to venture into free trades. Some industries are monopolistic in their market meaning they can set the market prices. This may affect the consumers in a negative way since such companies can initiate prices that are much higher than expected. The only alternative for the government to solve such issues it by allowing other countries to import similar commodities for the consumers. This will reduce the market prices of such commodities since the rivalry firm may tend to reduce their cost significantly.
Trade barriers refer to the restrictions and tariffs that a country put on other to lessen the number of imports from foreign countries. Mexico and India agreement led to the reducing of such trade barriers and allowed both countries to conduct business effectively. Experts have indicated that move as beneficial to both countries since it has led to increased economy in the recent years. Sharing of ideas and information is another beneficial that Mexico and India have gained through have trade agreements. By having free trade between the two countries, they can be able to learn from each other about the strategies that the other firm is using to produce better products that them. This will force the other country to implement those measures to ensure that they increase the quality of their products. Technology is another aspect that is essential for business. Companies that are known to perform better in the market usually use the best technologies that ensure efficiency and effectiveness. Mexico and India have shared different types of technologies for all those years. This has enabled both countries to export most of their products to other countries in the regions.The introduction of free trade between the two countries has encouraged some people to venture into certain types of business since they are sure of a wider marker areas. One of the issues that scare people from investing in an individual business is the idea of not getting enough market as expected. This will make them seek another alternative form of business that is not competitive sufficiently. By having free trade, people can start up business and exports most of their products to the other country improving their living standards. Such people are also able to employ more people in the community creating many jobs opportunity. By having a different trade, citizens of certain countries will likely to get employment opportunities from those established and next business sectors. This will have a positive impact on the economy of both India and Mexico. Many disadvantages are brought about by tariffs that countries impose on exports. The tariffs are likely to increase the prices of domestic goods. This is because the domestic goods are liable to dominate the market where the consumer would not have a say but to abide by the set prices. Several countries have been affected by this element, yet they still argue that they want to promote the local goods. The tariffs that are imposed on the manufacturers will have to be passed to the consumers who in this case are innocent.
Free trade is beneficial even if one country is not productive that the other. This is because there are several benefits that each country is likely to gain forming one another despite the productivity of the other country. When it comes to good business, the support from other manufacturers is usually important. It ensures that each sector can learn to form one other for the benefit of increasing the market. The information that is learnt for the other company can be used to ensure that production rates are increased. This can lead to the country exporting its products to other countries apart from the one that is having free trade. The primary objective of every firm is to have diversity regarding the market. It will enable them to produce more products leading to increased profits for that company. Mexico and India have significantly benefited from the signed free trade agreement despite the fact that Mexico is more productive that India in several aspects.
Hanson, A, and Lynn M. Z. (2013). Free Trade. Detroit: Greenhaven Press.Peloso, J. (2005). Free Trade. Bronx, NY: H.W. Wilson.
Young, M. (2009). Free Trade. Detroit: Greenhaven Press.
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