Advantages And Disadvantages Of Free Trade Agreements

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Although Free Trade Agreements provide for several advantages, such as the reduction of trade barriers, there are also disadvantages related to FTA’s. According to Grimson (2014), one of the disadvantages of Free Trade Agreements in general, is the fact that the agreements will enable advanced economies to gain control over the smaller and developing economies. Besides, critics argue that multilateral agreements are more effective for encouraging trade liberalization than FTA’s. Moreover, the agreements could result in economic instability (Grimson, 2014).
Chapter 1 outlined the fact that even though Botswana, Lesotho, Namibia, and Swaziland are third parties in the Trade, Development, and Cooperation Agreement, those countries have become
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The third component of this formula is the development component, for which the less developed Members will be weighted in favor. The development component exists of the remaining 15% of the total amount that is distributed through the revenue-sharing formula, and is calculated in inverse to the excise component: the Member States with the lowest GDP receive the highest share of this component. This clarifies that Lesotho and Swaziland are heavily dependent on this component, as those countries are the poorest in the customs union. The aim of the development component is thus to equalize the total share that all Members receive (Grynberg & Motswapong, n.d, pg. 10). The only net contributor to the development component is South Africa, and it came into existence with the aim to protect the BLNS countries against the harmful effects originating from both bilateral as well as multilateral trade liberalization. The objective is to support those countries to manage trade liberalization with external partners. It could be assumed that the development component, which is funded by South Africa, is related to the acceptance of Botswana, Lesotho, Namibia, and Swaziland of the Free Trade Agreement between South Africa and the EU, as the negotiations of both agreements were held around the same time (Staak, van der. 2006, pg. …show more content…
The disadvantages discussed in this section are related to the SADC EPA, the challenges that the SACU is facing, the agricultural sector within the customs area, and global economic uncertainty. The SADC EPA could potentially cause several negative effects. One of the possible disadvantages is that Africa’s integration might be at risk. The Southern African Customs Union also is facing problems, as all of its Member States are frustrated by certain aspects of the Customs Union. Moreover, the agricultural sector of the countries concerned is negatively impacted by the TDCA, as the agreement allows the EU to export cheap agricultural products into the region. Finally, global economic uncertainty is problematic for the BLNS countries. South Africa has been affected by the global economic crisis, and because of the fact that the BLNS countries are depended on South Africa, those countries also have been affected. This, again, is related to the Free Trade Agreement, as the Eurozone is one of South Africa’s most important export

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