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The logic of formal trade agreements is that they outline what is agreed upon and specify the punishments for deviation from the rules set in the agreement. [1] Trade agreements therefore make misunderstandings less likely, and create confidence on both sides that cheating will be punished; this increases the likelihood of long-term cooperation ...
Free trade – Absence of government restriction on international trade; Free-trade area – a region encompassing a trade bloc whose member countries have signed a free trade agreement. Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and ...
Strategic trade theory suggests that in some industries global economic interaction gives rise to zero-sum competition over the excess returns available in oligopolistic industries. [ 6 ] In the absence of intervention by any government, the firm that is the first to enter a particular industry will win and by doing so will deter entry by ...
Realism recognizes that trade regulations can be used to correct domestic distortions and to promote new industries. Under realism, states possess a high degree of discretionary power to influence many variables and prices in the economy. The government influences the distribution of investment, thus protecting national industries.
Regionalism, or Regional Trade Agreements (RTA), are trade policies and agreements that are crafted by the nations in a region for the purposes of increasing international trade in the area. RTAs have been described by supporters as a means of increasing free trade with the goal of eventually merging into larger, either bilateral or ...
According to mainstream economics theory, the selective application of free trade agreements to some countries and tariffs on others can lead to economic inefficiency through the process of trade diversion. It is efficient for a good to be produced by the country which is the lowest cost producer, but this does not always take place if a high ...
An investigation into the limits of Fair Trade as a development tool and the risk of clean-washing, HEI Working Papers, vol. 6, Geneva: Economics Section, Graduate Institute of International Studies, October. Mohan, S. (2010), Fair Trade Without the Froth – a dispassionate economic analysis of 'Fair Trade', London: Institute of Economic Affairs.
A successful agreement must be flexible and governments need to accept that it will need to evolve. Trade agreements must generate relevant reforms in areas such as customs documentation, but also more fundamentally in relaxing rules for cross-border transportation. Selling to new markets requires adequate finance.