Free and International Trade, Barriers, Trading Bloc, Trends, Exchange Rates and NICs

1. Explain free trade, including the theory of absolute and comparative advantage.
The concept of free trade supposes that countries benefit when they trade goods and services without government interference and trade restrictions. The theory of absolute and comparative advantage is a concept in international trade. The theory of absolute advantage highlights that a country must specialize and export what it knows how to do better than the trading patterns.
Absolute advantage is the ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of inputs per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity of inputs, than its competitors.
The theory of comparative advantage is that nations must specialize and export where there are lower opportunity costs than the trading patterns to improve production efficiency and improve the standard of living. Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

Beef

British Gin

The United Kingdom

15000

60000

Australia

35000

5000


0.42

12

In the free trade agreement between the United Kingdom and Australia, when I put the labor force as input in the transaction process between the two sides, a comparison in the number of transactions between the two sides can be obtained, the UK has an absolute advantage in British gin. In comparing the opportunity cost of producing beef, we can see that Australia has a relatively low opportunity cost. So Australia has a comparative advantage in producing beef.
2. Identify three gains from international trade.
International trade promotes economic growth where there is increased competitiveness as international trade facilitates access to wider markets. When the economy grows, there is also an increase in income levels. .China's economy has grown rapidly since becoming a WTO member in 2018.
International trade encourages large-scale production where there is specialization. Large-scale production, in turn, helps to stimulate and meet demand, while specialization reduces the price of goods and services.
New businesses are more likely to emerge when there is international trade and companies. Foreign traders are likely to invest in countries with a favorable business environment and international trade increases productivity.
3. Describe two forms of trade barrier that might be employed by a country to protect its industry and markets, giving real life examples of these measures.
 The most common trade barriers are tariffs and non-tariffs. Tariffs protect key industries where there is an imposition of tariffs on imports, making them more expensive. For instance, in 2018 and 2019, President Trump levied tariffs on products and commodities such as steel and aluminum, mainly targeting the Chinese. The purpose of this one of his policies is to protect the price of local steel in the United States. The increased tariffs on Chinese exports did raise the price of local steel and aluminum in the U.S., but it also created a shortage of resources.
The non-tariffs trade barrier limits the amount or value of imported goods. Quotas target certain products like olives or imports from specific countries, such as the importation of Australian beef. Australia can export 438,214 tons to the US at a zero-tariff rate and quotas commence 1st January of each year.
4. With reference to the examples you have cited, explain why governments employ such protection measures.
Governments employ tariffs to encourage domestic production growth, support key industries and promote infant industries. There is less foreign competition when tariffs allow the domestic producers to thrive. Governments also target improving government revenue from imports. President Trump also focused on trade protectionism against unfair trade practices as US deficit with China had increased while there were accusations of China dumping goods.
Non-tariffs increase the price of imported goods as there is a limited supply while encouraging domestic production and protecting industries from competition. The volume of imports remains unchanged when there is an increase in demand. Governments shift their reproduction to facilitate domestic production. There is more focus on finished goods and not agricultural production.  The Non-tariff like quotas on Australian beef are meant to regulate the volume of trade, while also boosting the domestic production restricting Australian competition in the beef market.
5. Describe the role of the World Trade Organization in the development of free trade.
The World Trade Organization (WTO) is the international body that deals with the rules governing trade between countries. WTO agreements are negotiated and signed by the majority of countries that participate in world trade. The WTO facilitates smooth trade flows and lowers trade barriers, including tariffs based on negotiated trade agreements. The WTO monitors trade agreements. There is also the development of trade relations between the members where global rules govern trade and dispute resolution. Managing trade agreements and negotiations has been crucial to trade growth. There have been numerous bilateral and regional free trade agreements and cooperation s that have facilitated trade openness, making it easier for countries to trade with fewer restrictions.
6. Explain the role of one trading bloc from EU, NAFTA, or ASEAN.
The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration by the Founding Fathers of ASEAN. Association of Southeast Asian Nations (ASEAN), an economic union for countries in Southeast Asia focuses on accelerating economic growth in the region, besides promoting social progress, ensuring peace and security. ASEAN has also facilitated free trade agreements in Asia to increase trade volume among the members and cooperation. Strengthening economic ties and removing trade barriers in the trading alliance. There is also a focus on improving increase market access for the ASEAN members and encouraging competitiveness where there is economic integration. ASEAN aims to accelerate the economic growth, social progress and cultural development in the region through joint endeavors in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations; promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter; promote active collaboration and mutual assistance on ma...