Which Statement Reflect The Purpose Of Trade Agreements

In addition to trade diversion and the creation of trades that have essentially static effects, participants in free trade zones and union unions also aim for dynamic benefits, such as expansion production, as companies take advantage of the growing size of the market to increase production and improve efficiency when firms adapt to increased competition. Access to a larger market is particularly important for small countries whose economies are too small to warrant large-scale production. In analyzing the impact of a surplus or deficit, economists often consider „trade“ very far in the definition. In general, economists do not consider simply the balance of trade in goods, such as the „current account balance,“ which includes the trade balance of goods and services, as well as net income from international income (profits transferred from foreign investments, royalties, interest and dividends) and unilateral transfers (foreign aid and transfers of individuals to be relevant). With the exception of unilateral transfers, all of these elements are included in our trade agreements. One of the best-known defenders of this philosophy, known as mercantilism, was Thomas Mun, a director of the British East India Company. In a letter written to his son in the 1630s, he said: „The ordinary way to increase our wealth and treasure is foreign trade, and we must never respect that rule. more to sell to foreigners each year, that wee consume their value. . . .

This order has been properly maintained in our trade, . . . . . that some of our stock that has not been returned to us in goods must necessarily be developed.“ [1] However, a number of countries – including Japan, South Korea, China and other Far Eastern countries – have followed a model of neo-omercantilism in which they are trying to grow through aggressive export expansion, as well as a very moderate reduction in import barriers. These countries are trying to develop powerful export industries by first protecting their domestic industries from foreign competition and by providing subsidies and other aid to stimulate growth, often including currency manipulation. The GATT authors felt that the removal of trade barriers should be done on a multilateral basis, in order to obtain the most important benefits of expanded production on the basis of comparative advantages. As noted above, they have included this term in Article I of the GATT (most favoured nation, MFN, treatment), which requires members to grant equal treatment of trade barriers to all GATT members. The classical Western business model was based on the economic realities of the 18th century. The factors of production were relatively fixed: the land was immobile (although its fertility or use may change) and labour mobility was severely constrained by political constraints. For most of the century, cross-border capital movements have been constrained by political barriers and lack of knowledge in other markets.

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