Fta / Epa And The Current Trade Essay examples

1410 Words Jan 10th, 2016 null Page
2-1. FTA/EPA and the current trade
In terms of the classical theory, FTA is the first step of economic integration, which is a ‘fusion of national markets’, and abolishment of tariffs and allotment of quotas among the member countries (Balassa, 1962: 2). Particularly, under perfect competition, trade liberalisation may enable economic welfare to maximise (ibid, 59). Due to open markets, reallocation of productive resources from less to more efficient countries could occur and national industries tend to be specialised as comparative advantage; this leads a rise in average productivity (Baldwin, 2008: 2, 33). In the long run, trade liberalisation can prosper national economy of member countries by expanding economy of scale. However, liberalisation can enlarge the gap between winners and losers; FTAs are prone to imply protectionist bias, since final producers would avoid competitiveness and enjoy the protected conditions; eventually, this could cause economic insufficiency at international level (ibid: 59; Krueger, 1993). Also, sensitive sectors tend to be excluded from agreements (Baldwin and Wyplosz, 2015: 284).

Nevertheless, international trade pattern has changed last two decades. The most crucial factor in international trade and business is Global Supply Chain (GSC) and non-tariff measures (NTMs), which are trade and investment rules or standards existing ‘beyond the border’, are recognised as obstacles; in order to promote GSC, trade in services is more enthusiastic…

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