Rules And Regulations Of Free Trade essay example
It also ensures that all parties comply with the terms of the trading agreement. The problem with free trade in America is it generosity has caused the foreign industry to take over the United States marketplace. This has resulted in high unemployment rates because the consumers and corporations can purchase foreign goods for a little less than domestic product. If each nation can produce what it does best and permits trade, over the long run everyone will enjoy lower prices and higher levels of output, income and consumption that could be achieved in isolation. Trade restrictions that are put in place by the government on foreign products lower the standard of living for American consumers.
Tariffs, quotas, and other trade barriers are the functional equivalent of a tax. It raises the cost of foreign goods and increases the price that consumers pay. The structure of trade restrictions imposes an unbalanced burden on those least able to pay. Nearly all governments limit, to some extent, the freedom of their citizens to freely trade with the citizens of other countries. The World Trade Organization (WTO) is a primary international body that is supposed to help promote free trade; however, it is very opaque and will not allow public participation, but welcomes large corporations. Multinational corporations are another type of nongovernmental actor and are private businesses headquartered in one state that invest and operate extensively in other countries.
These transnational corporations or international corporations have a lot of controversy surrounding them. Multinational companies try to avoid the restrictions government puts in place by doing business in that country. Multinational corporations use the corrupt government in the lesser developed countries to avoid the restrictions that are put in place. These governments are offered bribes in exchange for their cooperation. They are in business to make profit, and they do so by minimizing the cost of the factors they use in production, both the primary factors, land, labor and capital and secondary factors such as taxes and regulations. They then sell goods and services for as high as price as they can get.
Today, many businesses are taking advantage of the opportunity to relocate production to places where these costs are far lower. Goods can be exported to places where people are willing to pay higher prices for them. This is a major advantage of international trade. But, well-funded corporate lobbies can also secure higher prices through privilege by tariffs or subsidies, often granted in return for large contributions to ever more costly political campaigns.
Furthermore, many developing countries are saddled with huge foreign debt. A great deal of money was loaned to the governments of developing nations, under the assumption that their lack of development could be remedied by a huge infusion of capital. But the capital was not productively used, in most cases. It lined the pockets of corrupt government officials, or purchased weapons, that actually did nothing to increase wealth production. But now the loans have to be paid back and these programs are inflicted on the taxpaying people of those countries, which is another set back against the development. Under such conditions, these countries have no incentive to impose health, safety or environmental regulations on foreign businesses that bring capital and jobs into their countries.
And, the ruling elites in those nations have a strong incentive to quash any effort of workers in their countries to organize and strike for higher wages. The government should keep rules and regulations of free trade fair. They should not let companies be able to do one thing and countries another. Everyone who participates in trading should follow the same rules.
Companies should not be able to take advantage of these lesser developed countries because of its government.