The Discussion Focuses on “Geographical Proximity”.

It also includes the Bilateral

Trade Agreements, Unilateral Trade Liberalization, Special Economic Zones,
Exchange rate adjustments, Reduction in Transport Costs and Improved
Telecommunications.

Geographical Proximity refers to a great extent to the location of firms, and

integrates the social dimension of economic mechanisms, or what is sometimes
called functional distance.
A bilateral trade agreement confers favored trading status between two nations. By
giving them access to each other's markets, it increases trade and economic growth.
First, it eliminates tariffs and other trade taxes. This gives companies within both
countries a price advantage.
So far, economies that have progressed and expanded faster than the average are
those that embarked on unilateral trade liberalization. Yes, one-way liberalization
without waiting for other countries and trade partners to liberalize and reduce tariff by
the same amount.
A special economic zone (SEZ) is an area in which the business and trade laws are
different from the rest of the country. SEZs are located within a country's national
borders, and their aims include increased trade balance, employment, increased
investment, job creation and effective administration.
An exchange rate adjustment is a procedure adopted to eliminate the valuation
effects arising from movements in exchange rates from data expressed in a common
currency.

Trade Liberalization has a positive benefits in which it promotes free trade, which
allows countries to trade goods without regulatory barriers or their associated costs.
This reduced regulation decreases costs for countries that trade with other nations
and may, ultimately, result in lower consumer prices because imports are subject to
lower fees and competition is likely to increase. Increased competition from abroad
as a result of trade liberalization creates an incentive for greater efficiency and
cheaper production by domestic firms. This competition might also spur a country to
shift resources to industries in which it may have a competitive advantage. However,
trade liberalization can negatively affect certain businesses within a nation because
of greater competition from foreign producers and may result in less local support for
those industries. There may also be a financial and social risk if products or raw
materials come from countries with lower environmental standards. Trade
liberalization can pose a threat to developing nations or economies because they are
forced to compete in the same market as stronger economies or nations. This
challenge can stifle established local industries or result in the failure of newly
developed industries there.