The Free-Trade Area of the Americas - Essay Example

The Free-Trade Area of the Americas Introduction Free-Trade refers to a system whereby capital, labor, and goods freely flow from one nation to another without barriers that hinders trade process. Under free-trade economy, there are no false demands and supplies of goods or artificial costs because it gives the exact depiction of the definite demand and supply. Reasons why governments across the Americas are pushing for the free trade area For the past few years, diplomats from 34 nations have been working hard to push for the establishment of a free trade area. The following are reasons why governments across the Americas are pushing for the free trade area. First, a country will only specialize in selling goods and services which it can do be and trade with other nations for its wants. This is a representation of actual supply and demand of free trade market. This is because when a certain country concentrates the products that it can do best, such a country takes economy of scale advantage and manufactures their products at reduced production costs. Secondly, these governments argue that free trade area will lead to increased imports and exports, thus increasing availability of products in the involved nations therefore, bringing healthier competition. Another reason why governments across the Americas are pushing for a free trade area is that it will reduce living costs, thus increasing economic growth (Carranza, 2005). This is because it will do away with governmental interventions such as taxes and tariffs thus enabling consumers to purchase products at reduced costs. This will also bring good bond between the involved countries leading to healthier governance and diplomatic global ties. Why do some groups protest the implementation of the FTAA? Anti-FTAA group claims that free trade agreement extends treaties that were already adopted (NAFTA and FTA) from the acute North of Tierra del Fuego, Canada, and NAFTA had noxious outcomes with Mexico and the impacts negatively workers in the United States and in Canada (McNiel, 2007). Therefore, the protests argue that from this example, it is evident that the FTAA will bring disastrous effects on Latin America. From the protests point of view, the accords of Free Trade are Globalization masterpieces and thus they will allow deregulation as well as the opening of new markets through the elimination of trade barriers such as worker rights and environmental protection. Additionally, these accords will contribute to commodification and privatization of things such as education and healthcare services and due to globalization Free Trade aims at enriching “world masters” called big capitalists and financiers. Do you think the FTAA would help living standards in small countries? Free Trade will not help living standards in small countries instead it increases inequality and poverty. Free Trade will not work for small countries such as Nicaragua and Ecuador. For instance, during the recent years of rapid development in international trade, inequality has worsened globally and within nations. With Free Trade, which means no debt cancellation as well as no regulations to limit capital speculation, small countries will remain dominated by developed countries thus poor living standards (Carranza, 2005). This is because inequality will rise, and therefore the hope to achieve sustainable development in small countries will be in vain thus being a boon to the large countries such as the United States and Canada. What could governments do to help their small companies compete in trading blocs? Regional trade blocs refer to intergovernmental associations whose main purpose is to deal with as well as promoting trade activities for particular regions across the world. Small companies face challenges while competing with large companies. The activities of importing and exporting are mainly carried out by small companies. Canada and U.S have decided not to place tariffs, taxes on small trucking companies and therefore this will help such businesses grow. IFTA helps small companies, which have products copyrights by ensuring that their products are not copied. Governments can also help small companies by offerings free classes to enlighten them on matters concerning trade blocs, in order to make them understand trade blocs’ laws. Additionally, governments can help small companies by providing new companies that want to involve in export and import trade with loans (Sorokina, 2005). Lastly, governments can help small companies by giving tax breaks so that they can bring up their businesses. Do you think sub-regional trading blocs can help small nations strengthen their negotiating positions against large nations? The main argument for the implementation of sub-regional trade blocs is that large markets enjoy high productivity and efficiency through lower overhead and large factories. These factories benefit large nations that increase their production as well as saving money. The activities of small nations are profitable enough to enable them to negotiate their positions with these large nations. Creation of sub-regional trade blocs may make small nations feel that they are negotiating with larger competitors (Sorokina, 2005). To strengthen their negotiations with larger countries, they must be able to maintain their trading strategies to meet the standards of large nations. Do you think that very small nations should even participate in regional trade agreements with very large nations? The economies of smaller nations are based on exports and imports. The goods or raw materials needed to operate in these countries depend on imports. Regional trade agreement with large nations will be definitely be a significant move. This is because large nations will help smaller nations as their goods and services will have fair competitiveness and treatment in large nation markets. Secondly, participating in regional trade agreement will bring social effects on smaller nations. This may have an impact on employment status, social regulations, and immigration in small nations in either negative or positive way despite the negative impacts are far outweighed by the positive ones. Lastly, small nations should participate in regional trade agreements because RTA ensures that their cultural values are not impacted, for instance, protection of national treasures like archeological and historical values (Faine, 2004). Does sub-regional or regional trade agreements cause instability or foster cooperation? Despite the arguments presented by the protestors of Free Trade agreements, it is logical to argue that sub regional or regional trade agreements fosters cooperation between the involved parties. To begin with, these trade agreements promote competition and innovation. These trade agreements also generate economic growth. By fostering prospects for countries’ businesses, these agreements reward risk-taking through increment of profit margins, sales, as well as market share. Also, these agreements foster support for laws. Companies that are involved in global trade markets must abide by the terms and conditions of laws and norms of international markets (Carranza, 2005). Through this adherence to laws, trade agreements reduce corruption opportunities. Conclusion Despite the above discussed drawbacks of regional trade agreements, it is my opinion that their progress should continue. Regional trade agreements bring freedom of movement as well as increased trade opportunities. Implementation of these agreements will cause democratic and social progress that will be impossible without them. Although some critics argue that these new forms of trade will bring new challenges, it will also new levels or opportunities for the involved parties to achieve economic growth and prosperity. References Carranza, M. E. (2005). MERCOSUR, the Free Trade Area of the Americas, and the Future of US Hegemony in Latin America. Fordham Int'l LJ, 27, 1029. Faine, L. M. (2004). Internationalization of Chilean Agriculture: Implications of the United States-Chile Free Trade Agreement, The. Minn. J. Global Trade, 13, 383. Sorokina, E. V. (2005). Chile's Free Trade Agreements: Can Their Benefits Survive Chile's Continuing Controls On Foreign Capital. Am. U. Int'l L. Rev., 18, 1217. McNiel, D. E. (2007). NAFTA Panel Decision on Canadian Tariff-Rate Quotas: Imagining a Tariffying Bargain, The. Yale J. Int'l L., 22, 345. Read More