Free Trade Agreements Are Trade Research Paper

The level of industrialization of the SEA countries also varies largely but this can be attributed to the difference in the size of the domestic market of each country or region and their overall level of development on the economic front. Singapore and Indonesia have benefitted largely from the creation of the ASEAN since these countries are the larger of the SEA countries. Malaysia has also benefitted as a result of being highly industrialized and acting as an outsourcing hub for many companies who need cheap labor and other input costs Keling et al., 2011()

Relevance to international business and globalization

Looking at free trade agreements in general and the case study of the ASEAN, we can see that free trade agreements have a key part to play in strengthening the economies of the member states. Therefore, this implies that countries can form free trade agreements in order to create comparative advantage and encourage specialization. It also helps to increase volume of trade and thus assist in economic growth of the member states Jason & Dayton, 2008()

The creation and sustenance of free trade agreements is facilitated by legislation and policies that encourage trade. Therefore, the member states should also have strong policies and legislation to encourage the proliferation of the free trade area. This includes sanctions for re-exportation and the elimination of trade barriers Ben-David & Loewy, 1998()

In as much as free trade agreements are an economic integration strategy for the member states, there is the issue of response to globalization. Regional cooperation has never been an easy task since each country has their own national interests. Therefore, how these countries respond to globalization and other economic, social and political variables will affect the other member states. This is a challenge for free trade areas which needs to be curbed Ben-David & Loewy, 1998()

What the student can take away from this information

As a student, there are many things that can be learnt. First is that free trade agreements have been advantageous to improving the economies of the member states and increasing the volume of trade between the countries.Additionally, I've learnt that free trade agreements need more than the mere signing of the agreement. They require policies and legislation to help in the prosperity. I've also learnt about one challenge for free trade agreements which is that of the countries responding differently to economic, political and social variables which could bring issues in the prosperity of the free trade area.

Questions for further discussion

By examining the basis upon which free trade agreements are created, one can envision some sort of discrimination or favoritism. This arises from the tariffs and quotas between member states not being uniform but rather being different. Therefore, one important question would be whether free trade agreements that have uniform tariffs and quotas can further help the free trade area prosper.

Since tariffs and taxes charged on imports and exports are a huge source of revenue for many countries, there is the question on whether member states of free trade agreements are able to sustain their national budget or they have to rely on funding. This is especially since though volume of trade will be increased, the amount of income the government makes will be significantly reduced as a result of elimination or reduction of tariffs.

References

Ben-David, D., & Loewy, M.B. (1998). Free Trade, Growth, and Convergence. Journal of Economic Growth, 3(2), 143-170.

Jason, H.G., & Dayton, M.L. (2008). Do Regional Trade Agreements Increase Members' Agricultural Trade? American Journal of Agricultural Economics, 90(3), 765-782.

Keling, M.F., Som, H.M., Saludin, M.N., Shuib, M.S., & Ajis, M.N. e. (2011). The Development of ASEAN from Historical Approach. [Article]. Asian Social Science, 7(7), 169-189.

Kowalczyk, C., & Riezman, R. (2009). Free Trade: What Are the Terms-of-Trade Effects? Economic Theory, 41(1), 147-161.

Manger, M. (2005). Competition and Bilateralism in Trade Policy: The Case of Japan's Free Trade Agreements. Review of International Political Economy, 12(5), 804-828.

Tay, S. (2001). The FUTURE….....