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

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

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

Explanation & AnswerSolution by a verified expert

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.

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