Global trade and integration

Consumers nowadays purchase many products that originate in other

countries. The movement of goods across borders ties countries, businesses,
and citizens together. The flow of goods increases the diversity of products for
people to enjoy. Trade creates new competition for local companies. Many
governments actively monitor and attempt to influence the exchange of goods.
In our presentation, we will focus on the movement of goods, people,
and money, including the two main types of trade. Exporting takes place when
goods are transferred or shipped to a foreign country. When goods are
transferred or entered into a country, importing occurs.
The theory of absolute advantage:
Absolute advantage theory suggests that a country has an advantage
when it can produce more of a good or service than another country using the
same amount of resources. The theory draws attention to the advantages
countries hold in terms of certain activities.
To easily understand: absolute advantage theory is a theory that states a
country has the ability to produce a greater amount of a good or service using
the same amount of resources used by another country.

Examples:
Let's take the fictional example of Brazil vs China in the production of coffee
and garments. Brazil requires 30 hours to produce a bag of coffee while China
requires 60 hours to do the same. China requires 10 hours to produce a bolt
of clothing while Brazil requires 40 hours to do the same. Considering the
number of working hours required by each country to produce these goods as
a homogenous source, Brazil has the Absolute Advantage in producing coffee
while China has the Absolute Advantage in producing garments. Smiths
theory falters when a certain country has the Absolute Advantage in producing
the maximum number of goods. In this case the country would be almost self
sufficient and has no need to participate in international trade.

Before the 19th century, most European countries tried to do just that
prioritizing self-sufficiency in a system called mercantilism. Mercantilism aimed
to maximize exports, minimize imports, and increase the country's supply of
gold. This system led to strict tariffs, or taxes on imports, as a way to not only
discourage bringing in goods from abroad, but profit off it. Mercantilism
created barriers to international trade.
Countries aim to produce as much as possible on their own, including
things they weren't able to make efficiently. In the late 18th century, so-called
classical economists refuted these long-held beliefs, championing the idea
that societies should trade with one another to be more successful because of
comparative advantage

The theory of comparative advantage:

Comparative advantage theory posits that a country has the ability to produce
a good or service at lower levels of opportunity cost than other countries.
Opportunity costs represent the key component of the theory. A trade-off
exists when a country produces two products instead of focusing on just the
product that it produces most efficiently.
To easily understand: comparative advantage theory: a theory that states a
country has the ability to produce a good or service at lower levels of
opportunity cost than that in other countries
The idea that when countries focus on making things, they're
comparatively good at and the rest everyone benefits.
This is known as specialization, and when countries don't have to spend
time and resources producing textiles or wine, for example, there's more room
for them to innovate and create entirely new products.
Comparative advantage theory presents a strong argument for country
specialization. The advantages that emerge offer the core benefits from trade.
Specializing allows both countries to benefit. Production efficiency increases,
consumers in both countries are able to purchase more goods, and, over time,
the countries become more skilled at their specialties.
Example:
Consider two hypothetical countries, Atlantica and Pacifica, with equivalent
populations and resource endowments, with each producing two products:
butter and bacon. Each year, Atlantica can produce either 12 tubs of butter or
six slabs of bacon, while Pacifica can produce either six tubs of butter or 12
slabs of bacon.
Each country needs a minimum of four tubs of butter and four slabs of bacon
to survive. In a state of autarky, producing solely on their own for their own
needs, Atlantica can spend one-third of the year making butter and two-thirds
of the year making bacon, for a total of four tubs of butter and four slabs of
bacon.
Pacifica can spend one-third of the year making bacon and two-thirds making
butter to produce the same: four tubs of butter and four slabs of bacon. This
leaves each country at the brink of survival, with barely enough butter and
bacon to go around. However, note that Atlantica has an absolute advantage
in producing butter and Pacifica has an absolute advantage in producing
bacon.
If each country were to specialize in their absolute advantage, Atlantica could
make 12 tubs of butter and no bacon in a year, while Pacifica makes no butter
and 12 slabs of bacon. By specializing, the two countries divide the tasks of
their labor between them.
If they then trade six tubs of butter for six slabs of bacon, each country would
then have six of each. Both countries would now be better off than before,
because each would have six tubs of butter and six slabs of bacon, as
opposed to four of each good which they could produce on their own.

Free Trade:
Goods, money, and people move across the borders of countries. The
movement of goods forms the foundation of international marketing activities.
Free trade occurs when products travel across boundaries with little
governmental interference
To easily understand: free trade is an economic situation in which goods travel
across boundaries with little interference by individual governments.
The Benefits of Free Trade:
Using the economic theories of absolute and comparative advantage, many
economists have built arguments that conclude free trade offers several
benefits.
Some of its benefits have been stated:

Free trade restrains the power of the state and empowers individuals

Free trade brings people together across distances and cultures, leading to peace

Free trade makes everyone wealthier

Free trade encourages basic human rights

Individual freedom and empowerment often emerge as benefits of free

trade. Consumers enjoy the ability to choose from a range of products from
around the world instead of governmental forces leveraging power to reduce
choice. Businesses and business owners participate in a fair, open global
market. Government does not constrain business activity, which leads to
greater freedom.
 Trade between countries, at its core, connects people. A Vietnamese
brand in cooperation with international brands. Or a Vietnamese who loves
football is a fan of Manchester United club. Small connections such as these
multiply around the world, drawing people closer together. Interconnectivity
increases cultural knowledge, intertwines countries economically, and reduces
conflicts between states. Free trade increases the chance for peace. Positive
economic consequences of international trade for countries combined with
pleasant individual-level purchasing activities and experiences may help
reduce conflicts between nations.
The absolute advantage and comparative advantage theories suggest
that free trade may be related to greater levels of wealth. The ability to
specialize, the drive to innovate, and operational efficiencies increase in free
trade situations, which lead to a rise in global market wealth. China is a
growing influence on other developing economies through trade, investment,
and ideas. Following China’s swift reopening after the COVID-19 outbreaks in
late 2022, GDP growth is expected to rebound to 5.1 percent in 2023, from 3
percent in 2022. Net exports are expected to weigh on growth, due to softer
external demand coupled with a modest acceleration in import growth driven
by the increase in domestic demand. the foundation of the country’s growth
economically rests on the shoulders of increased trade especially in industrial
production, agriculture, telecommunications.
The increase in wealth, particularly in less-developed countries,helps
facilitate greater freedom for citizens. Wealth often represents power. Given
sufficient wealth, citizens begin to have a voice in their governance. When a
strong middle class with a large enough political sway emerges, the citizens of
a country can pressure governmental leaders to grant greater political
freedoms. The wealth that comes from trade then leads to greater human
rights.
Trade and governmental forms:
When conducting international trade, marketers consider the types of
governments in a specified region or country, including democracies,
authoritarian states, or anarchies.
- A democratic government: Democracy means rule by the people. A
democratic country has a system of government in which the people
have the power to participate in decision-making. Each democracy is
unique and works in different ways. In some democracies citizens help
make decisions directly by voting on laws and policy proposals (direct
democracy) Switzerland is a rare example of a country with instruments
of direct democracy. Citizens have more power than in a representative
democracy. On any political level citizens can propose changes to the
 constitution (popular initiative), or ask for an optional referendum to be
held on any law voted by the federal, cantonal parliament, and/or
municipal legislative body. In others, like Australia, citizens choose
representatives to make decisions on their behalf (representative
democracy).
- Dictatorship government is a type of government in which a single
person—the dictator—or party has all political power. The power results
from control of the military, through wealth, or those factors combined
with corruption. Examples of dictatorships include North Korea has
President Kim Jong-Un and Cuba. When the ruler or ruling body claims
political power due to religious reasons and in many cases is ruled by a
religious figure, such as in Iran or the Vatican City, the form of
government is a theocracy.
- A monarchy is a government that Power is obtained and passed on
through family connections who inherit the position. Some, such as the
one in Great Britain, are constitutional monarchies with a king or queen
while having ceremonial duties and certain responsibilities, and do not
have any political power. Saudi Arabia and Swaziland maintain absolute
monarchies in which the hereditary ruler retains control over the political
system. They can amend, reject, or create laws, represent the country’s
interests abroad, appoint political leaders, and so on.
- Anarchism occurs in the absence of any ruling governmental form.
Countries experiencing anarchy may revert to tribalism or warlord rule.
Somalia from the early 1990s to the mid-2000s offers an example.
Businesses tend to avoid entry into a country moving toward or in a
state of anarchy.

Governmental forms influence choices made with regard to the

allocation of resources. Governmental leaders often dictate the distribution of
wealth and economic activities.
Many assert that free trade merits government intervention, and the
government type may influence the form of this intervention. Others argue that
free trade represents a fundamentally positive force. International trade theory
provides the foundation for this discussion, with two theories that serve as
guides: absolute advantage theory and comparative advantage theory.

Governmental policies supporting trade:

Many governments take steps to encourage trade, often in the form of trade
agreements. Almost all regions of the world have existing trade agreements
designed to ease the movement of goods between countries. Some countries
establish free trade zones, which are specially designated areas within a
country featuring separate laws that encourage trade.
• These laws may include a reduction or complete removal of tariffs or
fees on goods entering or leaving through the free trade zone.
• Preferential currency exchange rates, reduction of business start-up
fees,
• Preferential access to distribution channels are additional incentives
present in free trade zones. When promoted and developed correctly, free
trade zones foster rapid growth.
Free trade zones feature specially designated areas within a country that have
separate laws designed to encourage trade.
Integration:
Integration refers to the process of using agreements between countries to
lower limits on the movements of products, capital, and/or labor. The
integration allows governments to facilitate trade, and many countries have
joined such agreements. These arrangements reduce barriers to trade;
however, integration refers to more formal, deeper agreements.
Levels of integration:
- A free trade area institutes the first level of integration. When a group of
countries enters into an agreement to reduce tariffs, quotas, and other
barriers to the movement of goods and services, the result becomes a
free trade area.
To easily understand: free trade area: a group of countries that have entered
into an agreement to reduce tariffs, quotas, and other barriers to the
movement of goods and services.
Taking NAFTA - The North American Free Trade Agreement and EU -
The European Community, within the broader European Union as examples.
- The next level, an economic union, occurs when countries agree to an
economic policy that seeks to create harmony between members as
they attempt to follow the same economic policies. The countries often
create a common currency along with a central bank. The EU currently
constitutes an economic union.
- A political union is the complete integration of political and economic
policy. It represents the final level before the creation of a new country.
Presently, no examples of a political union exist, although some nations
in the European Union have expressed the goal of becoming one.
 Reasons for integration success:
There are many factors influence the successes or failures of integrative
efforts
- Successful past integration builds skills and commitment to the
integrative process. Regions including Western Europe and the
Americas trace their integrative traditions to the early 1900s.
- A cultural disposition toward trade and connections, even in the face of
historical conflict, eased those transitions. Post-World War II Western
Germany quickly transitioned to participating as a full member in various
European integrative activities.
- Some countries have experienced historical events and contain
divergent cultures, which makes increasing ties with neighbors more
difficult. Regions such as Asia do not have the same tradition of trade
agreements and are less inclined to overlook past conflicts. China and
Japan still maintain resentment and conflict over activities, including war
crimes committed during War World II.
- Complementary resources that fill gaps for the countries involved
increase the chance of integration success such as NAFTA’s member
countries.
- Geographic distance increases costs and complicates shipping.
Physical distance affects the economic union between Singapore and
Taiwan as compared to a union between Singapore and South Africa.
The geographic proximity affords an advantage to the Singapore–
Taiwan relationship.
Integration trends:
Several trends and global integration processes have recently emerged.
Initially, trade deals focused on manufactured goods but increasingly services
are traded.
Instead of exporting, some businesses offshore manufacturing or
business processing.
+ Offshoring: the movement of business activity to another country

Example: Individual banks offshore back-office functions to other countries

that provide an efficient and cheap workforce. Offshoring manufacturing the
first stage of production of goods in another country where the raw material
and labor cost is cheap and keeps finished products in its own country.
WhatsApp Messenger, popularly known as WhatsApp, is an American
free messaging and Voice-over-IP service application — now owned by
Facebook. In its early days, the founders of WhatsApp had offshored its
services to developers in Russia to create the application at a low cost. As the
organization grew, some of its Russian developers moved to the USA. Later,
Facebook acquired the company for $16 billion as it grew successful.

+ Outsourcing: relinquishing organizational control of a business

process and instead hiring a third party external to the company to operate the
process

Example: an outsourcing company is IKEA. This is one example that comes

first to your mind when thinking about thought-out delegation. No production
belongs to IKEA, instead, it partners with 2.500 suppliers. IKEA also delegates
logistics. The company directs all its resources to the retail process. Remote
contractors cover all other processes.

WTO and integration:

After World War Two, the newly formed United Nations created the
General Agreement on Tariffs and Trade which is called GATT, substantially
lowered trade barriers like tariffs and created rules to dictate how countries
should trade freely.
The GATT became the World Trade Organization in 1995 and tried to
eliminate even more obstacles to keep up with the changing world. A
fundamental component of World Trade Organization membership is the
most-favored-nation (MFN) status. All member countries with MFN status
must be treated equally. The clause is the first article of the original GATT
agreement and provides the fundamental benefit of WTO membership.
The WTO expanded the definition of trade to include not just goods but
services, and to create rules governing intellectual property such as copyright
or a patent. The WTO is also an arena for countries to hammer out the rules
and regulations of international trade and lodge complaints if they believe
those rules aren't followed.
According to the principle of comparative advantage, if one country can't
sell a high-quality product at a reasonable price point or new technology
makes the business uncompetitive, It will not succeed. Its stores or factories
might be forced to close and jobs will be lost. That country must then adjust its
economy around something it can be comparatively good at. This is the nature
of international trade. However, some countries and industries are accused of
skirting the rules of international trade, and that's where the WTO tries to
come in. For example, in the United States, labor unions argue the WTO
doesn't adequately protect US wages from being undercut by unfair trade
practices in China. And some developing countries say the WTO rules don't
take into consideration their unique circumstances. For example, agricultural
subsidies provided by wealthy governments make it hard for sellers from
smaller or poorer countries to reasonably export their crops to those countries.
The WTO has failed to solve these problems. They are especially hard to
address because changes to the rules require consensus among the WTO's
164 member countries. Some countries forge bilateral and regional trade
agreements to address their particular needs and trade strategies.

EU
The European Union is a Political and Economic Union of 27 European
countries with common goals and values. It is a unique entity, as it is neither a
country nor a federation, European Countries but rather a supranational
organization that exercises some of the powers typically associated with
national governments. For those unaware supranational refers to a level of
organization that is above and transcends National governments. What this
means is that the EU's member states have transferred some of their
sovereignty to the EU, in order to jointly address issues such as Trade,
Security and Social Policy. The EU comprises seven main institutions
including the European Council, the Council of the European Union, the
European commission. European Central Bank, The Court of Justice of the
European Union, the European Central Bank, the court of Auditors and finally
the European Parliament.
The EU has a lot of functions but there are three main ones. Firstly the
EU promotes economic integration. The EU operates a Single Market which
allows Goods, Services, Capital and People to move freely across National
borders. For example, a company based in Germany can sell its products to
customers in France without facing any barriers to trade. The EU also
negotiates trade agreements with other countries on behalf of its member
states. For example, the EU has signed trade agreements with countries such
as Japan, Canada and South Korea. Secondly the EU develops and
implements common policies in various areas such as Agriculture,
Environment, Energy and Transport. For example, the EU has a common
Agricultural Policy which provides financial support to farmers and helps to
ensure a stable supply of food across the EU. Or the EU's common Energy
Policy which aims to reduce greenhouse gas emissions and ensure a secure
supply of energy. Thirdly, the EU is committed to protecting fundamental
human rights, such as the right of freedom of expression, privacy and non-
discrimination. For example, the EU's General Data Protection Regulation to
Protection Regulation where companies must obtain users consent before
collecting and using their personal data.
The European Union Has no official single leader but is instead broken
down into seven institutions that share power. The three main ones are the
European Commission, the European Parliament and the European Council,
each with a different leader. However, the president of the European
commission is the closest candidate to a leader of the EU as they stand at the
head of the ship driving EU legislation and representing the EU on the
international stage. Currently, this is Ursula von der Leyen.
Some latest news that you might have known:
- EU with the UK:
It has been 3 years since the UK officially left the European Union (EU).
Farewell to the common EU roof with many expectations and plans,
however, the current context must be something that the UK does not
want, when the Land of fog is facing many socio-economic challenges
unprecedented association.
+ Trade declines
+ Lagging investment
+ The local currency depreciates
+ Difficult post-Brexit deal related to Northern Ireland
+ Shortage of more than 300,000 workers
- EU with Russia:
+ Since the Russia-Ukraine conflict broke out, EU countries have made efforts
to reduce dependence on Russian fossil energy by looking for alternative
sources, combined with adjustments to limit demand.
+ The EU then made efforts to diversify its energy structure. Russian gas is
being replaced by gas from Norwegian pipelines or liquefied natural gas
(LNG) ships from the US, Qatar, Nigeria and Algeria.
+ The EU and its allies have imposed a series of sanctions against Russia. So
far, the EU has applied 9 packages of sanctions against Russia on many
sectors of the economy as well as businessmen and politicians.

African integration
• Africa has many agreements creating loose ties between countries.
• Actual implementation is limited.
• Currency unions also common:
- Central African Franc
- West African Franc
- West African Monetary Union
Map 3.8 African Trade Agreements

Table: African Currency Agreements

Central African Franc

Cameroon, Central African Republic, Chad, Republic of the Congo,

Equatorial Guinea, and Gabon

West African Franc

Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal,

and Togo

West African Monetary Union

Ghana, Guinea, Liberia, Nigeria, Sierra Leone, and The Gambia

Several African countries have signed trade and currency agreements.

Middle East
• The Greater Arab Free Trade Area (GFTA), founded in 1997, includes
seventeen members of the Arab League plus Algeria. Table 3.15 displays the
members as well as the members of another key Middle East economic
agreement, the Cooperation Council for the Arab States of the Gulf (GCC).
The GFTA agreement calls for an eventual uniform tariff between members,
sharing of standards, and an aggressive 40% reduction of tariffs.
Integration in ASIA: Integration is less in Asia than in Europe or the
Americas

Table: Asian Trade- Related Agreements

Association of Southeast Asian Nations Free Trade Area

Asia-Pacific Economic Cooperation:

Trans-Pacific Strategic Economic Partnership Agreement

South Asian Association for Regional Cooperation

Asian Integration
Association of Southeast Asian Nations Free Trade Area
The oldest trade agreement in Asia, the Association of Southeast
Asian Nations (ASEAN), began in 1967. The members of the ASEAN free
trade area (FTA) are shown in Map.
- The Association of Southeast Asian Nations concentrates on political
alliances, defense, culture, and education. Economic integration
constitutes one of the group’s primary goals. In 2015, ASEAN
established the ASEAN Economic Community. Meeting in Malaysia,
members committed to greater trade partnerships and a reduction in
cost for trade. The group also began efforts to smooth the process of
immigration with the goal of freer movement of people.
 - Old enemies became new partners and in the second half of the 1990s,
Vietnam, Laos, Myanmar and Cambodia joined ASEAN. The collapse of
the USSR, the founding of the WTO and a financial crisis in Asia
prompted members to VIETNAM deepen their relations and adapt to the
new situation. It is a meeting of the heads of state and government,
where current problems are discussed and solutions are worked out.
- The main barrier to further integration for ASEAN lies in the disparate
political and economic features of the members. The government of
Myanmar has been traditionally at issue. With the democratic elections
in 2016, and with potential steps back around transparency and political
freedoms in other members, Myanmar has rapidly transitioned to a
potential leadership role within the organization.

Today, ASEAN is based on three pillars: As a political and security

community to ensure peace; as an economic community with a strong
domestic market, and as a social and cultural community (including a common
identity) ASEAN faces a number of challenges, especially in relation to social
and environmental justice.
Asia-Pacific Economic Cooperation:
The Asia-Pacific Economic Cooperation (APEC) group currently has
twenty-one members (see Table 3.14). Each member borders the Pacific
Ocean. The organization accounts for 2.8 billion people, 59% of global gross
domestic product (GDP), and 49% of world trade in 2015.
Trans-Pacific Partnership
After five years of negotiation, in October of 2014, the TPP was
announced. The twelve countries involved represented 800 million people and
40% of global trade. One key component of the deal was the removal of China
from the integration.The twelve-country collective stated the ambitious goal of
forming an economic union as integrated as the European Union.
South Asian Association for Regional Cooperation
The South Asian region, contains few large trade agreements. The
largest connecting organization, the South Asian Association for Regional
Cooperation (SAARC), consists of eight member countries: These countries
signed the SAARC Preferential Trading Agreement in 1993 and have
discussed a potential SAARC free trade area. Political conflicts between the
countries in SAARC, particularly between India and Pakistan, present
roadblocks to integration. Consequently, many South Asian countries pursue
more easily negotiated bilateral trade agreements. The main point of
contention for all countries appears to arise from complaints about various
actions from Pakistan.
 The Cooperation Council for the Arab States of the Gulf, also known as
the Gulf Cooperation Council (GCC), founded in 1981, overlaps membership
with the GAFTA and Council of Arab Economic Unity (CAEU) (see Map 3.7).
The council focuses on many issues beyond trade and to a lesser extent,
economic integration. Recent conflicts between Qatar and other GCC
members have curtailed any progress on these goals, with Saudi Arabia,
Bahrain, Egypt, and the United Arab Emirates all breaking diplomatic relations
with the country. Until this broader crisis is solved, further integration will be
unlikely.
Integration in the Americas
North and South America have major trade organizations. None of the
institutions compares to the European Union but they do ease the movement
of goods within the Americas.

NAFTA
The north american free trade agreement or nafta was signed in 1994
and established a free trade area between canada mexico and the us it's
perhaps the most crucial component of the bilateral business relationship
between mexico and the united states & all quotas and taxes on u.s exports to
canada a mexico were removed on the 1st of january 2008.
The pact was intended to decrease trade expenses and enable north
america to become a highly competitive commercial block on the global stage
in addition. Three signature members pledge to abolish trade obstacles
among them and boost investment opportunities in small and medium-sized
enterprises or smes in Mexico Canada and the us due to the treaty. mexico is
the united states third biggest trade partner behind china and canada and its
second largest.
 The primary clauses of the north american free trade agreement are as
follows removal of non-tariff barriers.

Southern Cone Common Market

The Southern Cone Common Market, or Mercado Común del Sur, was
founded in 1991 with the signing of the Treaty of Asunción. MERCOSUR
seeks the eventual elimination of barriers to trade, the development of joint
policies toward non-members, and a common currency. Implementation has
not met expectations. Members frequently add barriers to trade, and response
mechanisms often have been ineffective. Some member countries elect to use
other organizations to resolve trade disputes instead of using MERCOSUR’s
administrative function. Map 3.3 identifies the members.
The countries within the trading block also have faced extreme economic and
political instability. Argentina’s currency crisis and a conflict over a pulp mill on
the Paraguay–Uruguay border have caused member states to struggle to
maintain their commitment to MERCOSUR’s principles.
 Andean Community
The Andean Community has deep historical roots of trade integration
and cooperation in South America, as reflected in the 1969 Andean Pact.
Initially, the Andean Pact focused on protecting local industries from outside
competition through high tariffs, a practice known as import substitution.
Protectionism
Protectionism refers to the desire to protect domestic businesses from
the exports of foreign firms through governmental policy. Lobbying by effective
domestic companies often creates pressure on governments to respond.
protectionism: the desire to protect domestic businesses from the
exports of foreign firms through governmental policy

Governments employ a variety of different tools or devices when trying

to reduce imports.
- For example, in 2018, the United States under President Donald
Trump's administration imposed tariffs on imported steel and aluminum.
This was a clear move towards protectionism, aiming to boost domestic
steel and aluminum industries by making imported products more
expensive
- The EU has imposed massive and unprecedented sanctions against
Russia in response to the war of aggression against Ukraine. Sanctions
include targeted restrictive measures (individual sanctions), economic
sanctions and visa measures. The EU has banned over €43.9 billion in
exported goods to Russia and €91.2 billion in imported goods. This
means that 49% of exports and 58% of imports are currently
sanctioned, compared to 2021.After a year of the campaign, Russia has
faced numerous sanctions from many parties, but a series of efforts
have helped its economy not suffer as much damage as the West
expected. And as far as you know, the Oil and gas embargo for Russia
does break the entire supply chain. Embargo on Russian oil and gas is
a necessary but painful step that is going to raise energy prices even
higher.
Arguments for Protectionism

Examples:
• Protect local industry, especially infant industry: One famous example
was the unique properties of Japanese snow that led to a ban on foreign ski
equipment. China and India followed a similar path (Pilling, 2010).
Environmental and Sustainability Issues
Trade raises environmental concerns and affects the cultural identities
of countries. As sustainability increasingly becomes a focus for governments,
citizens, and many businesses, the differences between environmental
regulations in various countries draw greater attention. Environmental
regulations may result in an increase in costs, at least in the short term;
companies producing in countries with less-stringent regulations may be able
to lower prices for consumers as a result. Some environmentally conscious
consumers and businesses are willing to pay higher prices for such items.
Moreover, the importing of art, entertainment, music, and other similar items
from Western countries influences the culture of a least- or less-developed or
developing country. To protect that local culture and tradition, governments
take protectionist steps.
Legal and Ethical Issues
Global trade often places marketers in countries where business
practices may involve legally and ethically questionable corruption and
bribery.
Governments also commonly regulate businesses to make sure that
monopolies do not form.
The Future
Arguments regarding free trade and protectionism will likely continue.
Many national leaders conclude that regional trade associations are in their
country’s best national interests, as witnessed by the growth in membership in
these organizations.
CONCLUSION
From just 1990 to 2015, world trade volume increased more than
fivefold from 3.5 trillion to 19 trillion. International trade has created a tightly
interconnected world economy that's given more people than ever access to
cheaper and better goods and services. It's created millions of jobs and
strengthened international connections leading to global stability. At the same
time, trade can hurt those individuals, companies, and communities where
imports make it impossible for local firms to compete against better or cheaper
goods from somewhere else. Trade will inevitably create winners and losers,
but it is inseparable from modern life. The challenge, then, for policymakers is
to assist those who have been disadvantaged with support and the training for
new jobs so everyone can continue to benefit from the system that is given
more choices to consumers and more work for producers in every corner of
the world.