Free Market Access for Foreign Firms - Essay Example

FREE MARKET ACCESS FOR FOREIGN FIRMS Foreign trade is the large scale international process of exporting and importing products from across different countries. In other words, this is trade that happens across the border of countries (Nature of international business, nd, p.3-22). For this trade to be effectively carried out, the international community has put in place special instruments that are able to govern the way in which all parties involved conduct themselves. In this way all countries are able to have a standard platform for trading. The community has been able to put into place active players that maintain the smooth flow of international trade agreements and processes. The main actors for this trade are varied. An actor in this case simply refers to an established system or social structure which has the mandate to act and manipulate the global trading structure in one way or another. The chief player in regulating as far international trade is concerned is the United Nations. This is an organization that comprises of all independent nations. Other critical players include governments of independent republics, various multinational corporations, NGOs, among many others. These actors have to work harmoniously to establish rules that govern international trade and ensure they are implemented to the later (Global actors, 2009, p 1). International trading is facilitated by important legal, political and social frameworks. There are numerous central and international rules that have been set on a wide range of issues. When these rules are followed, international trade is seen to have huge benefits for all the participants. The rules have been set to safeguard against dumping, issues of subsidies and intellectual property and most importantly; free trading regions. It therefore goes without saying that this trade comprises of a clearly established legal structure governing all this issues. The WTO is an organ of the United Nations that comprises of legal staructures as well as institutiotanl frameworks which govern internatonal trade. Through this organ, member countries have a platformupon which they can make neotiations, do an implementation of set guidelines and resolve any arising disputes (Legal Information institute 1992, p 1). The WTO rules that govern international trade have been seen to be biased on some economies of the world. For instance, the first rule that discusses about the notion of a prefered or favoured nation. Under this agreement, a favour that is done to one coutry has to apply to all countries. This accord applies selectively to different countries. Some coutries may decide to establish a trade agreement which is only applies to those goods specifically traded by the groups. This has the effect of closing out on those countries that are not within the group. This rule tends to lock out on developing countries, this is because these countries within a certain group may opt to raise barriers for those goods that they may not prefer into their economies. In the real case there should be no discrimination between and among countries. To the developing countries, this rule undermines the contribution of local firms in their push towards developing of their economies (World Trade Organisation 2014, p, 1). The concept of free market access for foreign markets makes it hard for developing economies to grow and compete effectively with their developed counterparts. Developed countries have a tendency to produce surplus goods which are in excess of what they consume so how do they treat this issue? Oftenly, they tend to dump them into the economes of developing countries. Most of the develping coutries depend largely on agricultural products which offers them unfavourable TOT. This countries receive smaller incomes from their exports compared to the payments they make from imports which comes from developed countries. In the long run, these developing nations end up with huge foreign debts. Their local firms suffer much in the light of these WTO rules (Edge, nd, p.1). International trade actvities happen at both qualitative and quantitative levels. The qualitative aspect of this trade deals with existing patterns of trade, it seeks to explain how countries make exports, i.e it explores trading parnerships, with respect to kinds of trade between and among countries, potential differences in relative opportunity considerations (Dixt & Norman, 1980, p.1-23). In addition, it stipulates the differences existing between and among countries with respect to technology, supply factors among others. This is where the aspect of trade protectionism comes in. according to the WTO rules, local and domestic firms need to be given due protection from competition against foreign firms. This is because developing economies depend much on this firms. When they are forced out due to competititonfrom foreign firms, economcies of these countries weakens and may fade out. For this reason, the existing rules established give priority to local firms so that they can grow and compete effectively on the international platfom for the welfare of their developing economies. On the other hand, quantitative aspects of international trade deals with existing terms of trade between and among trading partners in international trade. The relative prices associated with foreign trade are keenly analyzed. Quantitative aspects looks at how exports and imports are affected by such aspects as technological dynamics, rules pertaining tarrifs and so on. For instance, during the financial crisis that was experienced globally recently, many countries rose their protectionism measures in a bid to save their local firms. However, the falling employement rates forced some of them to buy their goods from other foreign firms, something that undermined local firms. A good example was in Australia where the government had to purchase police uniforms from foreign firms and not Austarlian companies. This was the same case with many other countries in the larger Europe and America. Countries participating in international trade have to keenly observe these parameters to ensure that there are mutual advantages among them(Stahler &Upmann, 2003, p 2). Usually, when this issues are not carefully considered, one paty will always suffer at the expense of the other. In most cases developing countries have been on the receiving end when these issues are not carefully considered (Yamaguchi, 2006, p.10-16). The best option for countries is to consistently consider the equilibrium analysis in the process of trading, without which they are bound to face some disadvantages to one party. Firms competing in international trade will always try to employ strategies that offer them competitive advantages over their rival (Marangos 2001, p. 689-704). Investments in foreign trade is an important and risk exercise for firms, at the same time its an imporatnt step since it exposes firms to external markets, giving them larger market share and hence tremendous gowth and development. Success in this field therefore requires firms to have proper information concerning available opportunities in various counties, thisinformation is usually availed by trade representatives in different countries (British coliumbia, 2014, p.1). Investment representatives are very important organs as far as international trade is concerned, they provide investment information to potential investors and potential buyers in different countries. WTO rule on fair competition in trade is usually creates the impression of international trade as a “free trade institution” this notion is not necessarily true (World Trade Organisation 2014, para 15-17 ). The rules on most favoured nation tends to give due preference to developed countries in terms of bargaining power. As a result of their ability to produce goods in surplus, they are able to dictate the markets. Countries that have lower outputs have a lower bargaining ground, this makes them end up depending on developed countries at the expense of the potentrial they have in their local firms. Politically, international trade has been pointed as a key tool which developed nations use to manipulate the politics of developing nations. Most of thiese nations are always at the mercies of developed nations. The fact that they finance a great deal of political and economical activities makes them attach many conditions to their relationships with developing. The weaker nations are then forced to adopt policies which though may not favour the local political and econimal climate, they benefit their developed counterparts. Developing countries should therefore know that international trade is a policy framework tool which governments and other interested parties venturing in foregn trade can use in order to create a conducive atmosphere and environment for investment (Better Policies for better lives nd, p.1).When all this issues are cafeully considered, individual firms and countries are bound to have sustainable relationships and mutual trade ties between and among the trading regions. Bibliography Better policies for better lives. nd. OECD investment policy tools. Available at, (Accessed Feb 25, 2014). British Columbia. 2014. Trade and Investment Representatives. Available at, (Accessed Feb 25, 2014). Dixt A, & Norman V. 1980. Theory of International Trade: A Dual, General Equilibrium Approach. Cambridge: Cambridge University Press. Edge K (nd). Free trade and protection: advantages and disadvantages of free trade. Available at, (Accessed Feb 25, 2014). Global Actors.2009. International Actors. Available at, (Accessed Feb 25, 2014). Marangos, J. 2001. International trade policies for transition economies: The Post Keynesian alternative. Journal of Post Keynesian Economics, 23(4), pp. 689-704. Nature of international business. (nd). The Challenging World of International Business. Available at, < http://highered.mcgraw-hill.com/sites/dl/free/0078029376/889427/Chapter01.pdf> (Accessed Feb 25, 2014). Stahler F &Upmann B. 2003.Market Entry Regulations and International Competition. available at < http//www.cesifo-group. de downloaded pdf> (Accessed Feb 25,2014). World Trade Organisation (2014). Understanding The WTO: BASICS; Principles of the trading system. Available at (Accessed Feb 25, 2014). Yamaguchi, T. 2006, Three essays on international agreements on trade policies, Madison: The University of Wisconsin - Madison. Read More