INTEGRATION AND BI-LATERAL TRADE AGREEMENTS

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INTEGRATIONAND BI-LATERAL TRADE AGREEMENTS

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QuestionOne

Advantages

TheUnited States is likely to reap massive benefits if it continues toengage in the bilateral agreements with China and South Korea. TheUnited States is the world with the largest external debt, and itsterms of trade are not the best performing despite being manageable.As a result, America will befit from the bi-lateral agreement becauseits export is likely to improve and hence its terms of trade. Thepopulation of China and South Korea is massive and provide a largermarket for goods and services produced in Korea. Further, UnitedStates will be able to import some cheaper goods from the two nationsgiven their advantageous position that allow them to utilize lowerproduction cost. Production of products in China is lower, andproducers in America may relocate their and products would be lower.The united states would be in a situation to forge an associationwith these nations based on economic interest and in the increaseprocess interdependence regarding keeping peace and stability topromote peacefully correlation and enhance doing business peacefully.

Disadvantages

Ashave been described above, the cost of production in China and SouthKorea is significantly lower compared to the United States.Bi-lateral trade agreements if not controlled may see a collapse inmany mega-producers in the United States because the cost ofproduction is very high in America. There is also the likelihood ofimporting substandard goods in the United States. The Asian market,led by the People’s Republic of China is known for production ofcheaper substandard products. With those products, the Americanmanufacturers may be forced out of the market due to the unhealthycompetition. It may lead to increased rate of unemployment unless itis well controlled. The cost of regulating the international trademay increase as a result and United States may not reap any benefitas a result (Finger,2009).

QuestionTwo

EuropeanUnion

Membersaffiliated with the European Union are from the European continent.In total, the political-economic association is made of twenty-eightcountries. No country have left the association after joining apartfrom, Greenland, which is an extended province of Denmark. However,all countries of Europe are not members but in a way consider joiningthe union. Possible candidates who would wish to join the union areAlbania, Serbia, Turkey, Montenegro, Iceland and Macedonia. Icelandhowever, put on hold talks in 2013 while Bosnia and Herzegovina andKosovo are officially recognized candidates.

Country

GDP $ in billion

GNP $ in billion

Bosnia and Herzegovina

17.851

36.98

Kosovo

7.072

16.57

Iceland

15.33

13.3

turkey

822.1

1409

Macedonia

10.2

24.27

Albania

12.92

28.84

Serbia

45.52

89.43

Montenegro

4.416

8.954

Theabove statistics have been extracted from the World Bank website andrepresent the data for the fiscal year ended 2013 which are thelatest in the World Bank. However, some other statistics of the GDPand GNP may slightly differ due to the difference in the estimationcriteria and estimation. Nevertheless, the World Bank statisticsrepresent an objective and uniform estimation, hence, credible(Daniels, Radebaugh &amp Sullivan, 2015).

Byjoining the European Union, the potential candidates are likely toreap a lot of benefit from the United States, which have a bi-lateraltrade agreement with the European Union. First, these countries arelikely to have a broader source of factors of production from thehuge economic potential of the United States. The United States isthe second highest economy regarding consumption despite being numberfive regarding population. This is an advantage to the countriesbecause they would have access to a larger market share. Furthermore,the currency of these countries is likely to be stable because therewould be increased the flow of foreign currency in these countries.The dollar and the euro are among the stable currencies in the world.Operating with the currencies would ensure economic stability andavoid adverse effects brought about by currency exchange ratefluctuations. Access to the huge amount of capital through floatingof Eurobonds will help the countries to cheaply access funds to coverthe budget deficit for these countries. The country will also benefitfrom the economic reformation aided by the United States (Levy,2007).

Ithink the countries should become full members of the European Union.During the 2008/9 global economic crisis, countries that suffered themost in Europe were those that were opposed to full economicintegration in Europe. Non-members of the European Union were alsohit badly, and some like Iceland received a bailout from theinternational monetary funds. However, those who were in the EuropeanUnion fully were stable in the crisis and only affected by the lowbusiness cycle of recession. These countries will achieve economicreformation of its economic institution and in the process be able toincrease their production. It would lead to enhanced terms of tradeand achieve long-term economic stability. The huge market wouldensure cheaper imports and low cost of exporting, hence, economicgrowth. These countries should join the various associations theyhave applied to and engage in meaningful negotiations to reap thebenefits from those associations (Egger&amp Pfaffermayr, 2008).

References

Daniels,J. D., Radebaugh, L. H., &amp Sullivan, D. P. (2015). Internationalbusiness: Environments and operations (15th ed.)

Egger,P., &amp Pfaffermayr, M. (2008). The pure effects of EuropeanIntegration on intra-EU core and Periphery trade. Universityof Innsbruck Working Paer,(1).

Finger,J. M. (2009). Trade liberalization: a public choice perspective.Institutionsand Trade Policy,151.

Levy,P. I. (2007). A political-economic analysis of free-trade agreements.TheAmerican Economic Review,506-519.

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