International trade and trade relations often involve an exchange of knowledge, ideas and culture between nations. This often leads to a better understanding between these countries and leads to amalité and theory reduces the possibility of commercial rivalry and war. “Yes, we`re going to enjoy it,” Laurenceson says. “Every time you lower trade barriers to create business opportunities, the benefits will flow. And this is amplified by the fact that 36% of our merchandise exports go to China. That`s more than the share of our next five biggest clients combined. Of course, bilateral agreements are never as good as multilateral agreements – even though China is an important trading partner, 64% of our exports will not be affected. International trade allows an industry to fully exploit the benefits of economies of scale (large-scale production). If some goods were manufactured only for the domestic market, it would not be possible to obtain the full advantage of large-scale production. As a result, free trade increases global production and global consumption of goods traded internationally, with each trading country producing only selected products at a lower cost.
He also says that with the UK`s entry into the European Union, New Zealand lost special trade privileges for a market that accounted for about 80% of its trade in the 1950s and 1960s. It had to find other export markets, but this was difficult due to high trade barriers, particularly in agricultural markets. New Zealand saw bilateral agreements as a way to remove some of these barriers. The willingness to sign bilateral agreements followed the effective collapse of multilateral agreements by the World Trade Organization. Trade protectionism is rarely the answer. High tariffs only protect domestic industry in the short term. In the long term, global companies will hire the cheapest workforce, anywhere in the world, to make higher profits. New Zealand also has agreements with Hong Kong, Malaysia, Thailand and Singapore and is in talks with India and Korea. 8. Free trade creates more opportunities to recruit workers with expertise.
Automakers sent jobs to Mexico because of NAFTA and then decided to import the vehicles into the United States because of the favourable tariff policy. Although this theme took some jobs from American workers, there were also companies that had the opportunity to find workers from almost everywhere in the world with the right level of know-how. In seeking foreign markets for this assistance, the cost of the manufacturing process remains low to keep prices competitive. 7. It helps people who can spend the least money. Some people think that more wealth can only come if a country can export more of its goods or services to other nations. The economic reality of free trade is that it is the overall level of imports and exports that accurately reflects prosperity. If people can spend more money at the lower level of national income, the whole economy benefits. That is why the removal of tariffs is an integral part of this process. The trend towards “bilateral” agreements has been fuelled by a number of factors, including their political appeal. Prime Ministers like nothing better than to announce a free trade agreement: it makes them believe that they are getting something. If there is free trade and tariffs and quotas are abolished, monopolies will also be abolished because more players will be able to enter the market and join the market.
From a strategic point of view, free trade can make a country vulnerable if it leads to the decline of critical industries. When a country becomes dependent on another country for critical products or services, it may be subject to political pressure and denied access to goods if the agreement is suddenly dissolved.