Free Trade Agreement Case

Talon Lewis

International Business

Professor Dahlberg

June 28, 2015

Free Trade Agreement

        The North American Free Trade Agreement (NAFTA) has created many opportunities throughout the world we know today. When thinking about trade it’s a privilege to have the freedom to trade between several of countries.  Trading goods and supplies has helped with the population and providing jobs with other nations. Free trade agreements are meant for eliminating all tariffs between two or more countries while trading goods, services, and investments. In this paper I will describe what a free trade agreement is, how it helps or hurts trade between countries and how many free trade agreements the US has compared to how many free trade agreements Brazil actually has.

        Before us getting into the paper with a little more depth we should discuss what Free Trade Agreement actually means to people trading across nations. According to the international business book used in class FTA is defined as a form of regional economic integration in which internal tariffs are abolished, but member countries set their own external tariffs. When discussing international trade there are different regulations and rules to follow from country to country. The relationship between conducting business internationally can be different from the norm. There are a set of theories that are normally followed when trading internationally.

        Dealing with other countries while trading and making business transactions there are set of theories broken down to absolute, acquired, and natural advantages. Absolute advantage is a theory which explains that certain countries can produce some goods more efficiently than other countries. Also, they should specialize in and export those things they can produce more efficiently and trade for other things they need.  A country's acquired advantage is a form of trade benefit with technology other than natural resources and climate. With this advantage it helps with competition against others, so you can create unique products and have a competitive advantage. On the other hand a country's natural advantage have climate conditions, to access to certain natural resources, which gives a country a competitive advantage for producing some products.

        Free Trade Agreement can be seen as a great advantage for many countries and also, this can be a disadvantage to countries and in the future harm the relationship between the two countries. When trading internationally you can come across a government tax on goods imported and exported normally called a tariff. Not all countries trading internationally have tariffs but the ones who can cause some damage in the relationship with the other country they are doing business with. The reason this can happen is because the country can tax the goods shipped at an expensive price and some countries wouldn’t like the fact they are getting taxed on the goods.