Explain the advantages of a trade agreement and how it might impact a company

Explain the advantages of a trade agreement and how it might impact a company

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May 15, 2022
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Explain the advantages of a trade agreement and how it might impact a company like Red Fish-Blue Fish.

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Sample Response
Some advantages of the trade agreement are as follows:

Reduced Tariffs- The trade agreements often result in reduced tariffs. This creates an opportunity for sellers to enter foreign markets with a competitive price of the product.
Increased exports- The trade agreements lower the trade barriers on imported goods. The trade agreements enable lower prices for the consumers, increased exports, benefits from economies of scale, and a greater choice of goods.
Increased competition- The trade agreement contracts allow access to each other country's markets. It induces the local industries to become more competitive and rely less on government subsidies.
Encourage investment- The trade agreements can open new markets, increase GDP, and invite new investments. It helps improve the rules affecting such issues as intellectual property, e-commerce, and government procurement.

Various benefits for Company R by entering a trade agreement are as follows:

Improved manufacturing operations: Company R could improve its manufacturing operations by moving it abroad. The companies who have moved their operations overseas can benefit by having lenient labor laws, easier shipping procedures, and a cheaper labor force.
Better foreign investments: A trade agreement could help Company R to obtain more benefits from foreign investment. It can create an opportunity for Company R to expand its business as trade agreements will allow foreign countries to directly invest in Country U's domestic Company R.
Access to new markets: With the help of trade agreements, Company R could access and increase its reach to new markets, and invite new investments. By extending the business's global footprint, the company's products' reach increases. New consumers experience the product, which allows faster growth for the business.

Advantages of a trade agreement and its impact on a company like Red Fish-Blue Fish:

Trade Agreement Advantages:

  1. Reduced Tariffs:
    • Trade agreements often lead to reduced tariffs, providing an opportunity for sellers to enter foreign markets with competitive product pricing.
  2. Increased Exports:
    • Lowered trade barriers result in benefits such as lower prices for consumers, increased exports, economies of scale, and a wider choice of goods.
  3. Increased Competition:
    • Access to each other's markets encourages local industries to become more competitive, reducing reliance on government subsidies.
  4. Encouraged Investment:
    • Trade agreements open new markets, boost GDP, and attract new investments, while also improving regulations on intellectual property, e-commerce, and government procurement.

Impact on Red Fish-Blue Fish:

  1. Improved Manufacturing Operations:
    • Red Fish-Blue Fish could enhance its manufacturing operations by moving abroad, benefiting from lenient labor laws, streamlined shipping procedures, and a cost-effective labor force.
  2. Better Foreign Investments:
    • The trade agreement could facilitate increased benefits from foreign investments, allowing Red Fish-Blue Fish to expand its business with foreign countries directly investing in its domestic operations.
  3. Access to New Markets:
    • Through trade agreements, Red Fish-Blue Fish gains access to new markets, expanding its global footprint. This increased reach attracts new investments and consumers, fostering faster business growth.
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