The Impacts of International Agreements on Domestic Policy - Research Paper Example

These include presence of domestic distortions that may counter the process of investment and adjustment in new activities. Moreover, it is purported that trade gains and performance enjoyed by a nation relies on activities and performance of their trading partners. It is evident that foreign market accessibility reduces has both positive and negative effects on the trading activities of a given country. They can either raise or lower imports’ prices. Similarly, they have detrimental effects on the growth potential, investment incentives, and terms of trade of developing nations (Trela et al 271).

Multilateral and bilateral international agreements have been identified to facilitate in addressing externalities or negative pecuniary spillovers chanced by trading partners’ policies. In addition, they help in adoption of feasible national policies and be implemented as instruments to solve non-pecuniary externalities. Rather than just focusing on national policies that impacts pecuniary spillovers as the primary objective, attention has been raised due to the prevalence expansion of the domestic policies also known as the “behind the border” policies. . Controversies emerge in cases where trade agreements are extended behind the border policies.

This is in regards to government difficulties in drawing boundaries of the world trade organizations. Moreover, the government is faced with difficulties in determining the type of international organizations that can be better pursued through international trade organizations. Since, there exists no specific solution; specific analysis is inherent of the status quo domestic policies implications. Further, magnitude and existence of any negative spillovers and the benefits and costs impact of alternative forms of international associations is essential regarding to binding and voluntary dimensions.

International agreements fostering trade liberalization have little impacts on economic growth stimulation in countries with distorted capital, markets, and product. Studies show that increased openness to commerce positively correlates to income in all nations or regions. Nevertheless, it is associated with lower living standards in countries that impose high costs on restructuring or heavily controls new entry. Domestic policies in this sense restrict navigation of resources to sectors or firms exhibiting productive developments.

Trade openness productivity effects are positively defined by entry and exit of firms rather turnover rates. Therefore, international trades associations facilitate rather allow reallocation of production factors, particularly policies that promote domestic competition exemplified by entry and exit of resources and flexibility in the labour market (Bako 78). Governments are faced with challenges on how to embrace international agreements in solving domestic distortions and enhancing trade-related institutions.

International