What Is Free Trade Definition, Pros, and Cons

In the simplest of terms, free trade is the total absence of government policies restricting the import and export of goods and services. While economists have long argued that trade among nations is the key to maintaining a healthy global economy, few efforts to actually implement pure free-trade policies have ever succeeded. What exactly is free trade, and why do economists and the general public view it so differently?  Ã‚  Ã‚   Key Takeaways: Free Trade Free trade is the unrestricted importing and exporting of goods and services between countries. The opposite of free trade is protectionism—a highly-restrictive trade policy intended to eliminate competition from other countries. Today, most industrialized nations take part in hybrid free trade agreements (FTAs), negotiated multinational pacts which allow for, but regulate tariffs, quotas, and other trade restrictions.  Ã‚   Free Trade Definition Free trade is a largely theoretical policy under which governments impose absolutely no tariffs, taxes, or duties on imports, or quotas on exports. In this sense, free trade is the opposite of protectionism, a defensive trade policy intended to eliminate the possibility of foreign competition.  Ã‚   In reality, however, governments with generally free-trade policies still impose some measures to control imports and exports. Like the United States, most industrialized nations negotiate â€Å"free trade agreements,† or FTAs with other nations which determine the tariffs, duties, and subsidies the countries can impose on their imports and exports. For example, the North American Free Trade Agreement (NAFTA), between the United States, Canada, and Mexico is one of the best-known FTAs. Now common in international trade, FTA’s rarely result in pure, unrestricted free trade. In 1948, the United States along with more than 100 other countries agreed to the General Agreement on Tariffs and Trade (GATT), a pact that reduced tariffs and other barriers to trade between the signatory countries. In 1995, GATT was replaced by the World Trade Organization (WTO). Today, 164 countries, accounting for 98% of all world trade belong to the WTO. Despite their participation in FTAs and global trade organizations like the WTO, most governments still impose some protectionist-like trade restrictions such as tariffs and subsidies to protect local employment. For example, the so-called â€Å"Chicken Tax,† a 25% tariff on certain imported cars, light trucks, and vans imposed by President Lyndon Johnson in 1963 to protect U.S. automakers remains in effect today.   Free Trade Theories Since the days of the Ancient Greeks, economists have studied and debated the theories and effects of international trade policy. Do trade restrictions help or hurt the countries that impose them? And which trade policy, from strict protectionism to totally free trade is best for a given country? Through the years of debates over the benefits versus the costs of free trade policies to domestic industries, two predominant theories of free trade have emerged: mercantilism and comparative advantage. Mercantilism Mercantilism is the theory of maximizing revenue through exporting goods and services. The goal of mercantilism is a favorable balance of trade, in which the value of the goods a country exports exceeds the value of goods it imports. High tariffs on imported manufactured goods are a common characteristic of mercantilist policy. Advocates argue that mercantilist policy helps governments avoid trade deficits, in which expenditures for imports exceeds revenue from exports. For example, the United States, due to its elimination of mercantilist policies over time, has suffered a trade deficit since 1975.   Dominant in Europe from the 16th to the 18th centuries, mercantilism often led to colonial expansion and wars. As a result, it quickly declined in popularity. Today, as multinational organizations such as the WTO work to reduce tariffs globally, free trade agreements and non-tariff trade restrictions are supplanting mercantilist theory. Comparative Advantage Comparative advantage holds that all countries will always benefit from cooperation and participation in free trade. Popularly attributed to English economist David Ricardo and his 1817 book â€Å"Principles of Political Economy and Taxation,† the law of comparative advantage refers to a country’s ability to produce goods and provide services at a lower cost than other countries. Comparative advantage shares many of the characteristics of globalization, the theory that worldwide openness in trade will improve the standard of living in all countries. Comparative advantage is the opposite of absolute advantage—a country’s ability to produce more goods at a lower unit cost than other countries. Countries that can charge less for its goods than other countries and still make a profit are said to have an absolute advantage. Pros and Cons of Free Trade Would pure global free trade help or hurt the world? Here are a few issues to consider. 5 Advantages of Free Trade It stimulates economic growth: Even when limited restrictions like tariffs are applied, all countries involved tend to realize greater economic growth. For example, the Office of the US Trade Representative estimates that being a signatory of NAFTA (the North American Free Trade Agreement) increased the United States’ economic growth by 5% annually.It helps consumers: Trade restrictions like tariffs and quotas are implemented to protect local businesses and industries. When trade restrictions are removed, consumers tend to see lower prices because more products imported from countries with lower labor costs become available at the local level.It increases foreign investment: When not faced with trade restrictions, foreign investors tend to pour money into local businesses helping them expand and compete. In addition, many developing and isolated countries benefit from an influx of money from U.S. investors.It reduces government spending: Governments often subsidize local indus tries, like agriculture, for their loss of income due to export quotas. Once the quotas are lifted, the government’s tax revenues can be used for other purposes.It encourages technology transfer: In addition to human expertise, domestic businesses gain access to the latest technologies developed by their multinational partners. 5 Disadvantages of Free Trade It causes job loss through outsourcing: Tariffs tend to prevent job outsourcing by keeping product pricing at competitive levels. Free of tariffs, products imported from foreign countries with lower wages cost less. While this may be seemingly good for consumers, it makes it hard for local companies to compete, forcing them to reduce their workforce. Indeed, one of the main objections to NAFTA was that it outsourced American jobs to Mexico.It encourages theft of intellectual property: Many foreign governments, especially those in developing countries, often fail to take intellectual property rights seriously. Without the protection of patent laws, companies often have their innovations and new technologies stolen, forcing them to compete with lower-priced domestically-made fake products.It allows for poor working conditions:  Similarly, governments in developing countries rarely have laws to regulate and ensure safe and fair working conditions. Because free trade is partially depen dent on a lack of government restrictions, women and children are often forced to work in factories doing heavy labor under slave-like working conditions.It can harm the environment: Emerging countries have few, if any environmental protection laws. Since many free trade opportunities involve the exporting of natural resources like lumber or iron ore, clear-cutting of forests and un-reclaimed strip mining often decimate local environments.It reduces revenues: Due to the high level of competition spurred by unrestricted free trade, the businesses involved ultimately suffer reduced revenues. Smaller businesses in smaller countries are the most vulnerable to this effect. In the final analysis, the goal of business is to realize a higher profit, while the goal of government is to protect its people. Neither unrestricted free trade nor total protectionism will accomplish both. A mixture of the two, as implemented by multinational free trade agreements, has evolved as the best solution. Sources and Further Reference Baldwin, Robert E. The Political Economy of U.S. Import Policy, Cambridge: MIT Press, 1985Hugbauer, Gary C., and Kimberly A. Elliott. Measuring the Costs of Protection in the United States. Institute for International Economics, 1994Irwin, Douglas A. Free Trade Under Fire. Princeton University Press, 2005Mankiw, N. Gregory. Economists Actually Agree on This: The Wisdom of Free Trade. New York Times (April 24, 2015)Ricardo, David. Principles of Political Economy and Taxation. The Library of Economics and Liberty

The Healthcare Industry Face And Ways - 3472 Words

Abstract During this research I will discuss the challenges that the Healthcare Industry face and ways to mitigate these risks. It will also discuss security safeguards that will assist with preventing data breaches, from physical security up to network security. Protecting the organization data is the most important thing in a Healthcare facility. In the Healthcare industry, Health Insurance Portability and Accountability Act (HIPAA) has security rules that were established to protect individuals’ electronic personal health information (ePHI). There has been countless number of data breaches lately in healthcare facilities. They are at a much-much larger risk with the demand of healthcare facilities switching all of the data to an Electronic Health Records system. â€Å"Electronic Health Records is an electronic version of a patient’s medical history, that is maintained by the provider over time, and may include all of the key administrative clinical data relevant to tha t persons care under a particular provider, including demographics, progress notes, problems, medications, vital signs, past medical history, immunizations, laboratory data and radiology reports.† (Centers for Medicare Medicaid Services, 2012) There has been a rule created called the â€Å"Breach Notification Rule† which I will explain in detail. The security of the nation’s critical infrastructures is something that needs to be addressed, we are at risk in many different areas. 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Fdi in North America Free Essays

Analysis of Foreign Direct Investments of North America Kristin Daughdril amp; William Cassidy Business Administration 418 Abstract Foreign Direct Investment (FDI) is an investment involving a long-term relationship and reflecting a lasting interest in and control by a resident entity in one economy of an enterprise resident in a different economy (UNCTAD). There are two types of FDI, inflows and outflows, which can be used to help determine the investment strategies and economies of countries engaged in FDI. North America has been the source of nearly one-half of all investment and almost three-quarters of the jobs created throughout the globe (Huggins, 442). We will write a custom essay sample on Fdi in North America or any similar topic only for you Order Now North America is probably the most important continent when it comes to dealing with FDI. The three main countries of North America, the United States, Canada, and Mexico, all rank in the top 15 of world economies, proving them to be desirable partners in FDI transactions. The trends of FDI discussed in this report will be unparalleled to this information and can lead to some predictions on how future trends of the countries of North America will continue to be superior to that of the other continents of the world. Keywords: Foreign Direct Investment, FDI Inflow, FDI Outflow Foreign Direct Investment is investment of a company located in a different country either by buying a company in the country or expanding its business into the country. FDI can be done for many purposes. Companies may have tax incentives abroad, cheaper labor, abundant resources, target-specific markets or other reasons to enter into direct investment with a foreign country. Three components of FDI include equity capital, reinvestment earnings, and intra-company loans. These three components are the values that, if changed, will affect FDI first-hand. FDI inflows are flows of investment into the reporting country from a non-resident entity. Outflows are just the opposite. They are the reporting countries’ investments into a country abroad. FDI has become a major factor in accessing economic power in the world economy. The North American continent consists of many countries including the United States, Canada, Bermuda, Greenland, Mexico, Belize, Haiti, the Bahamas, Jamaica, and many others. This report focuses on the only two developed countries in North America, US and Canada, as well as another top economy of the world, Mexico. It has been found that North America has been the source of one-half of all foreign direct investment in the globe (Huggins, 442). All three countries are ranked in the top 15 in world economies. All three counties are members of WTO and, in spite of the differences in views on international trade and investment among the three countries; they entered NAFTA (North American Free Trade Agreement). NAFTA, along with the Canadian US Free Trade Agreement, CUSFTA, has increased the desirability of interest in the North American economic integration (Bird, 406). In the Americas, FDI is governed by a multi-layered system of agreements that include national investment statutes, bilateral investment treaties, free trade agreements, common markets, and multilateral instruments (Haslem). NAFTA: Recently, foreign direct investment has changed from relying on how much a country exports, to now focusing more on trade between countries. In order to focus more on trade, many countries have abolished some trade barriers between countries, causing countries to do away with the protectionism strategy. Mexico, Canada, and the US decided to become a part of the North American Free Trade Agreement. This agreement allows the countries to trade freely. As a result of NAFTA, their foreign direct investment rose dramatically; Mexico, as well as Canada, has seen a great increase in FDI and import production. This also lowers the cost of trading between these countries because they are close to each other. This reduces the cost of transportation, causing an incentive to trade together. This treaty is a big reason for Mexico and Canada’s success. Mexico: Mexico is the second largest recipient of FDI in Latin America and the Caribbean. Foreign direct investment plays a big role with Mexico’s success. More countries participate in trade with countries that have an open economy, since they do not have as many taxes and tariffs that many protectionist countries have. According to the World Investment Report 2006 published by the United Nations Conference on Trade and Development (UNCTAD), in 2005, ‘Mexico received more than 19 billion U. S dollars which puts it among the top 13 in the world and among the top four in developing countries. The United States has a big impact on Mexico’s economy. The spike in foreign direct invest in 2001 was due to the $12. 5 billion purchase of Banamex by United States’ Citigroup. This caused a dramatic increase in the FDI of Mexico in 2001. By looking at the graph of FDI flows within Mexico, it appears that there was a major drop of FDI in 2002; this is only due to 2001 being such a good year for Mexico. Canada: Foreign direct investment in Canada has increased dramatically from 1990 to 2002, an increase of four and a half times within these twelve years. The United States has a major affect on FDI in Canada. In 2001, United States obtained 90 percent of the inflows and 62 percent of the outflows. This is due to the signing of the North American Free Trade Agreement which has increased the cross-border transactions between the two countries. The removal of trade barriers has had a positive effect on the FDI in Canada. The increased presence of international entities in Canada helps to provide favorable economic conditions which are attractive to foreign investors. Since NAFTA, foreign direct investment has increased continuously; without it, Canada’s FDI would not be what it is today. United States: The United States have recently dominated the foreign investment playing field among the world economies. The position of the outward flow of FDI has exceeded that of the inward flow every year since 1982. Inflow and outflow are mainly dealt with developed economies, the largest partner being the United Kingdom, closely followed by Canada. Mexico is ranked number 12 as FDI partners with the US. Inward flows of FDI come mainly from the UK, Japan, Canada, and Switzerland. The US experienced steady growth from 1992 to 1998 followed by rapid growth in FDI inflow in 1999 and 2000. The high level of capital inflows between 1999 and 2001 reflects the strong foreign interest in US technology and telecommunications firms during the stock market boom years, prior to the market downturn in 2001 (Bloodgood). 001 recorded the lowest inflow increase the US had seen in many years. This could be due to the terrorist attacks on the world trade centers, causing the stock market crash. Investors may have feared the threat of potential future terrorist attacks. By 2004, investors saw past this threat and the US inflows went on the rise again (Dutta). United States’ outward flow of FDI transact main ly with the UK, Canada, the Caribbean, and Bermuda (Bloodgood). The flow of FDI into other countries stayed steady up until 2004 when the flow increased drastically. This was due to reinvested earnings and the decline of the value of US dollar compared to important host affiliates. Earnings in several industries grew sharply. In 2005, the US recorded its lowest percentage increase in FDI since 1982. The reason for this was that reinvested earnings turned negative in 2005, as cumulative retained earnings of foreign affiliates were drawn down to fund distributors to US parent counties as a result of tax incentives provided by the American Jobs Creation Act of 2004 (Koncz). The rise of outward FDI continued, however, to rise as though 2005 did not occur. Predictions: All three of the countries that have been studied from North America in the research paper have come across many setbacks and burdens in the past years when dealing with foreign direct investment. All three have also overcome many obstacles in order to pursue economic power by becoming international market influencers. All three counties show continued signs of reasonably steady growth in FDI outflow. Inward flow of FDI seems to be similar between the US and Canada. They have both had somewhat inconsistent rises in the inward flow. Nonetheless, they both continue trade with each other and probably will never decline in that particular area. Mexico has had relatively steady increases in inward flow of FDI and continue to rise, leading us to believe that they will continue on their pace to trying to become a developed economy. References Bird, F. , Vance, T. , ;amp; Wollstencroft, P. (2009). Fairness in International Trade and Investment: North American Perspective. Journal of Business Ethics, 84, 405-425. Bloodgood, L. 2008). Inbound and Outbound U. S. Direct Investment with Leading Partner Companies. Journal of International Commerce ;amp; Economics, 63-111. Borga, M. , ;amp; Yorgason, D. R. (2002).   Direct Investment Position for 2001: Country and Industry Detail. Survey of Current Business, 82(7), 23-25. Braithwaite, W. , Ciardullo, J. (2006). Investors Set Sights on Canada. International Financial Law Review, 45-49. Dutta, A. S. , Theis, J. , ;amp; Su, R. (2007). FDI into the US, 1998-2004. International Journal of Finance, 19(2), 4370-4379. Galan, B. , Oladipo, O. 2009) Have Liberalization and NAFTA had a Positive Impact on Mexico’s Output Growth?. Journal of Applied Economics. 12(1):159-180. Haslem, Paul Alexander. (2010). The Evolution of the FDI Regime in the Americas. Third World Quarte rly, 31, 1181-1203. Huggins, R. , Demirbag, M. , ;amp; Ratcheva, V. (2007). Global Knowledge and R;amp;D FDI Flows. International Review of Applied Economics, 21 (3), 437-451. Koncz, J. L. , ;amp; Yorgason, D. R. (2006). Direct Investment Position for 2005: Country and Industry Detail. Survey of Current Business, 86 (7), 20-35. Koncz, J. L. , ;amp; Yorgason, D. R. (2005). Direct Investment Position for 2004: Country and Industry Detail. Survey of Current Business, 85 (7), 40-53. Leitao, N. (2010). Foreign Direct Investment: The Canadian Experience. International Journal Of Economics ;amp; Finance, 2(4), 82-88. Oladipo, O. S. , ;amp; Vasquez Galan, B. I. (2009). The Controversy About Foreign Direct Investment as a Source of Growth for the Mexican Economy. Problemas Del Desarrollo. Revista Latinoamericana De Economia, 40(158), 91-112. Rosenzweig, P. M. (1994). The New â€Å"American Challenge†: Foreign Multinationals in the US. California Management Review, 36 (3), 107-123. Tan cer, R. S. (1997). Foreign Investment in North America and the Pharmaceutical Industry in Canada. International Executive, 39 (2), 283-297. Waldkirch A. The Effects of Foreign Direct Investment in Mexico since NAFTA. World Economy [serial online]. May 2010;33(5):710-745. Mexico: Inward FDI flow Mexico: Outward FDI flow Canada: Inward FDI flow Canada: Outward FDI flow United States: Inward FDI flow United States: Outward FDI flow How to cite Fdi in North America, Papers