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Free Trade

1. Introduction
Every report must begin with an introduction which explains the aim and structure of the Report. The aim of the Report is usually a repeat of the assignment brief. For example, the aim of this Report "is to critically evaluate......." Note that the structure of the assignment provides an outline of the order in which issues are examined. For example 'the structure of the Report is as follows; free trade; globalisation; World Trade Organisation (WTO); regional trade agreements (RTAS) and finally, summary and Conclusion'. This is followed by a critical examination of each of the Sections outlined above.
2. Free Trade
You need to demonstrate an understanding of key issues underpinning the trade debates. Here, you may wish to cover issues noted below, clearly Contrasting the benefits and costs (advantages and disadvantages)

Definitional issues - what is free trade? 
Factors which have prompted free trade 
Arguments for free trade (multilateralism) 
Arguments against free trade (protectionism)
Personal view regarding free trade (Overall is free trade good or bad?) 
Globalisation as an outcome of free trade (through trade liberalization - removal of trade barriers, move towards democratic governance)

3. Globalisation
There is much Consensus among academics that globalisation is the outcome increasing free trade; including the free movement of people and Capital. This has mainly been due to advances in technology logy, telecommunications and the advent of cheap transport. A brief but Critical examination of the concept ‘globalisation' is required under this section. Under this section, you may wish to cover the following key issues;

Definitional issues - what is globalisation and how real is it? 
Factors which have prompted globalisation - drivers of globalisation
Argument in favour of globalisation 
Arguments against globalization
Personal view regarding globalisation - what is your position in this debate?

The World Trade Organisation
The World Trade Organisation (WTO) generally supports free trade and globalisation. Remember, the assignment requires you to evaluate the view that Regional Trade Organisations such as the ASEAN ,EU and others, contradict principles underpinning free trade and globalisation. This technical part of the assignment requires you to identify and examine key WTO rules. Under this section you may wish to Cover the following issues (see WTO (2014) Understanding the WTO);

What is the WTO (a very brief history helps - probably four lines)? 
WTO's key aims and objectives 
What is the WTO's position of free trade and globalisation 
WTO key rules on free trade (Most Favored Nation -MFN, National
Treatment, Transparency, etc.) 
What is the WTO's position on Regional Trade Organisations (RTAS)

Regional Trade Organisation
The assignment requires you to examine whether RTAS contradict (go against) WTO rules on free trade and of course, globalisation. A clear understanding of this point is crucial. Therefore you may wish to cover the following issues (see Parthapratim (2012);
What are RTAS - give examples, but the focus should be on the EU
What are the general aims RTA especially in respect of free trade among member states and outsiders (see Pelkmans (200) EU competition rules)
Main reasons why RTAS are formed - very briefly - (political, economic and simply following others) 
The impact RTAS on free global trade
What is your position regarding WTO rules and RTAS - are RTAS stumbling blocs to free trade and globalisation or building blocks to global free trade? (see Peters, J. (204)

Free Trade

Since the early nineties of the last century and with the conclusion of the cold war, globalization is stated to be new calamity that has been dictating the world. From the period of early 1700, globalization has become a significant part of the international trade. The outcome is the materialization of the specialism in the global trade in terms of exchange of goods, resources and services (Marx 2015).

With the ephemeral of time, globalization has become a phenomenon that is deeply rooted. The result is, a product that has been constructed in the furthest part of the globe could make an easy entry into the market that is positioned in some other part of the world. As this trend has been becoming more established, intellectuals offered it with a theoretical assistance for the synchronization of such inclination, and that backing has been World Trade Organization (WTO). WTO has been one of the most powerful global bodies. The main aim has always been in providing commercial interests along with any obstacles in the path of maturity and extension of global business should be taken care of secondary.

This paper would be highlighting the role of the European Union in going against the spirit of free international trade applied by WTO. Globalization has been the result of free or less limited trading in goods, services along with capital among several nations. However, there several confronting issues that limit the growth of international trade like financial assistance, trade barriers and violation of the intellectual property rights (Stiglitz 2014).

Free Trade can be stated as a policy that is being followed by some of the global markets where the governments of the countries do not limit imports from, or exports to, other nations. Free trade is being exemplified by the Mercosur and the European Economic Area that have traditional the open markets (Anderson and Yotov 2016).. Governments of many countries restrict free trade in limiting the exports of the accepted resources. Other barriers that might encumber trade takes in the import quotas, non-tariff barriers like the regulatory legislation and taxes.

Free trade facilitates lower prices for the consumers, exports of increased nature, benefits from the economies of scale and the bigger preference of goods. The benefits of free trade take in:

  1. Theory of Comparative Advantage:

This takes into account that through specializing in goods where nations do possess a lower cost of opportunity, there might be an increase in the economic welfare for all the countries. Free trade has the ability in enabling the countries to concentrate in those goods having comparative advantage.

  1. Increased Competition:

Benefits of Free Trade

With additional trade, domestic firms would be facing stiffer competition from abroad. Therefore, there would be more incentives in cutting the costs and increasing the factor of efficiency. It might avert the domestic monopolies from charging high amount of prices.

  1. Trade is the engine of growth:

World trade has augmented since 1945 at an average of 7 per cent causing this to be one of the imperative contributors to the growth of the economy.

  1. Economies of Scale:

If countries can concentrate in certain goods that benefits from the economies of scale and lower standard costs, this is generally true for the industries having higher fixed costs or that needing higher investment levels. The advantages of the economies of scale would ultimately be leading to lower amount of prices for the consumers along with having greater effectiveness for the exporting firms.

The European Union (EU) has taken up free trade agreements along with other agreements with a trade constituent with many nations on global basis and is negotiating the same with many others (Cavusgil et al. 2014). Under the present circumstances there are four multi-lateral; areas of free trade within Europe. The EU allocates its single market with three European Free Trade Association (EFTA) members via the agreement with the European Economic Area, and the enduring EFTA member- Switzerland; via the agreements of bilateral nature.

EFTA countries have been enjoying admittance to the world’s biggest networks of the trade relations of [referential nature, covering about 80 per cent merchandise trade of EFTA (Irwin 2015). The network prolongs to enlarge, mainly thanks to the determined agenda of the negotiations. EFTA has also been able to sign Joint Declarations on the Cooperation with several countries in improving the factor of cooperation as the possible first step in negotiating an agreement of free trade (Hassoun 2014).

Some of the key economic and social influences against the policies of trade protectionist:

  1. Distortion of Market and Loss of Allocative Efficiency: Protectionism might be ineffective and costly means in supporting jobs.

-Higher prices for consumers: Tariffs have been pushing up the consumers prices and shield the unproductive sectors from real competition. They castigate the foreign producers encourages an incompetent allocation of the resources both globally and domestically.

Reduction in access of market for producers: Subsidies within exports depress the prices of the world along with damage output, investment, profits and jobs in many of the lower-income developing nations of the European Union that relies on export of primary and manufactured goods for their development.

  1. Inefficiencies in Production: Firms that are being confined from competition have little incentive in reducing the cost of production. This can often lead to X-inefficiency and higher costs of average.
  2. Trade Wars: There is often this danger that one country of the EU would be imposing controls on import that would be leading to retaliatory action by another primary to a decrease in the volume of the global trade. Actions related to retaliatory augments the costs of importing fresh technologies affecting the ‘Long Run Aggregate Supply’ (LRAS) (Gray 2014).
  3. Danger of Overdependence: Free trade has always brought in danger of dependence. A country might be encountering economic depression if its foreign trading partner has been suffering from it.

The world is becoming extremely globalized. The attention of the powerful nations along with the corporations have been shaping the terms of global trade. In the democratic countries, they have been shaping along with affecting the capability of the elected leaders in making decisions in the interests of their people.

  1. Technological drivers:


As per Marx (2015), liberalized rules of training along with the deregulated markets have lowered the tariffs and facilitated the foreign direct investments across the globe. The WTO and the GATT (General Agreement on Tariffs and Trade) along with the opening and privatization within Eastern Europe are some of the key examples of the fresh developments.

  1. Market Drivers:

As the local markets are becoming more saturated, the prospects for expansion are restricted along with global intensifying is a way most of the organizations select in overcoming this situation. Common needs of the customer requires and the prospects in using channels of global marketing and transferring marketing to some degree are also incentives in choosing internationalization.

  1. Cost Drivers:

Sourcing effectiveness and costs diverges from nation to nation along with the global firms can take benefits of this matter. Other drivers of cost to globalization are the prospects are the chance in building global scale economies and the high product maturity cost under present situation.

  1. Competitive Drivers:

With the global market, global inter-firm opposition augments and organizations are forced in playing global. Strong interdependences among the nations and high two-day trades along with the actions of FDI support the driver (Baccini, Dür and Haftel 2015).

Advances within the communication and transportation technology, pooled with ideology of free-market, have provided goods, services and capital unprecedented mobility. For example, the Northern countries wish for opening the world markets to their goods and taking advantage of abundant, cheap labor in the South (Hayes 2016). These countries have been using the global financial institutions, such as, the International Monetary Fund and the World Bank Group along with the agreements of regional trade in compelling the poor countries in integrating through reduction of tariffs, privatizing of the state enterprises along with relaxing the standards of labor and environment (Gaul 2016). Globalization opened up prospects in developing the economies for improving the population’s living standards.

At the time of defining globalization, it tried in minimizing the influence of the negative points and reinforcing of the positive ones. Some of the factors against globalization are lack of control over certain markets in trade along with concentrating of the richness and augmented social inequality factor (Altbach 2015). There is much dominance of the financial-speculative economy over the factor of real economy.

The World Trade Organization (WTO) is stated to be the only global organization that deals with the trade rules existing between the nations. At its heart are the agreements of WTO that is being negotiated and signed by most of the global trading nations, ratified within their parliaments. The goal of WTO is in ensuring the flow of trade remains smooth and inevitably as free as possible.

The World Trade Organization (WTO)

The agreements of WTO are of lengthy nature along with being complex as they are legal texts covering a broader activities range. They generally deal with agriculture, telecommunications, banking, safety of products and intellectual property. Under the agreements of WTO, the countries cannot normally differentiate between their trading partners. If any country is being granted a special favor by the EU like lowering the duty of customs, it has to do the same with all the other WTO member from the outside (Dür, Baccini and Elsig 2014). They can also provide the developing countries with special admission in their markets. They can even raise barrier to products that they think are being traded in unfair manner. Most Favored Nation (MFN) takes in every country either lowering a barrier for trade or opening up of a market should be done for all the same goods and services from the overall trading partners it has, rich or poor, weak or stronger. However, going against the WTO’s has become a trend where regional corporations often discriminate among the trade partners and seem to provide the benefits only to those who in return benefits them the most.

Regional Trade Agreements are mainly here to stay and in all probabilities would continue seeing an exponential extending along with deepening of the architecture. Over the period of past ten years a mutation has been witnessed of the conventional RTAs into the agreements of extra-regional covering bigger areas that is simply beyond the reduction of tariff. The multilateral system of the agreements of trade is generally been viewed as the efficient method in negotiating the reductions in tariff, opening of the markets and settling of the disputes. This would not be diluting the agreement that would be seek by WTO in ensuring consistency along with compliance between the rules which is being negotiated at the level of multilateral along with those at inter-regional and extra-regional extent. The work of WTO within the RTAs area needs to be tempered by the recognition that they are significant species within the ecosystem of global trade (Kohl, Brakman and Garretsen 2016).

The EU had been floating some interesting notions on defining the trade sustainability based on the volume of trade and lines of tariff. However, any proposal assessment needs to take into consideration the demands of the EU on the ongoing negotiations on Economic Partnership Agreements with the countries of ACP. Some delegations have started modulating the expected level of ambition related to the systematic facet of the negotiations of RTA. Nonetheless, the different treatment for the developing countries needs to be one of the major components of any rule of revised nature and needs to be a critical component of the RTA where there is a bit unevenness within the playing field.

Regional Trade Organization

As principles things might sound good as is being believed by the vast preponderance of the global nations for they have signed up to the WTO (Friedmann 2016). The factor of power politics has meant that WTO has acknowledged enough criticism from several groups along with the third world countries. It has often been seen that being opaque along with not facilitating enough participation of the public has been common within many countries while on the other side they have been welcoming to bigger associations. The importing nations are not able to differentiate the things that are being made while trading though this things sound good based on the factors of non-discrimination and equality. However, the reality is that some of the national laws along with the safety decisions and protection of people’s health and national economies have been considered as barriers for free trade (Esping-Andersen 2017. ).

6. Conclusion:

It can be concluded that globalization can be seen as the most viable means of achieving of social and intellectual modernity. Globalization has helped in bringing in free trade that has signifies same rule for all, those certain regional bodies do go against the agenda of WTO in offering the benefits to certain countries. However, WTO still has a firm hold on the free trade agreements between the countries and ensuring a fair way is being followed by every nation as per the agreement.


Altbach, P., 2015. Higher education and the WTO: Globalization run amok. International Higher Education, (23).

Anderson, J.E. and Yotov, Y.V., 2016. Terms of trade and global efficiency effects of free trade agreements, 1990–2002. Journal of International Economics, 99, pp.279-298.

Baccini, L., Dür, A. and Haftel, Y.Z., 2015. Imitation and innovation in international governance: the diffusion of trade agreement design. Trade cooperation: the purpose, design and effects of preferential trade agreements.

Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.

Dai, M., Yotov, Y.V. and Zylkin, T., 2014. On the trade-diversion effects of free trade agreements. Economics Letters, 122(2), pp.321-325.

Dür, A., Baccini, L. and Elsig, M., 2014. The design of international trade agreements: Introducing a new dataset. The Review of International Organizations, 9(3), pp.353-375.

Esping-Andersen, G., 2017. Politics against markets: The social democratic road to power. Princeton University Press.

Friedmann, D., 2016. The Uniqueness of the Trade Mark: A Critical Analysis of the Specificity and Territoriality Principles.

Gaul, S., 2016. The Technical Barriers to Trade Agreement: A Reconciliation of Divergent Values in the Global Trading System. Chi.-Kent L. Rev., 91, p.267.

Gray, J., 2014. Domestic capacity and the implementation gap in regional trade agreements. Comparative Political Studies, 47(1), pp.55-84.

Halbert, D.J., 2017. The Curious Case of Monopoly Rights as Free Trade. Journal of Information, 7.

Hassoun, N., 2014. Summary.

Hayes, J.P., 2016. Making trade policy in the European Community. Springer.

Irwin, D.A., 2015. Free trade under fire. Princeton University Press.

Kohl, T., Brakman, S. and Garretsen, H., 2016. Do trade agreements stimulate international trade differently? Evidence from 296 trade agreements. The World Economy, 39(1), pp.97-131.

Marx, K., 2015. On the question of free trade. Arsalan Ahmed.

Stiglitz, J., 2014. On the wrong side of globalization. The New York Times, 15.

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