Definition of international trade and explanation of the economic advantages of adopting mercantilism as an international trade policy, as well as the disadvantages. Free trade agreements are treaties that govern customs duties, taxes and tariffs imposed on countries on their imports and exports. The most well-known regional trade agreement in the United States is the North American Free Trade Agreement. In these areas, it is essential for companies to hire these experts in order to gain a competitive advantage. Thus, with international trade and globalization, it is much easier for these companies to hire these experts or, at the very least, to manage cooperation with them. Free trade agreements are intended to increase trade between two or more countries. Strengthening international trade has the following six main advantages: an internal market is deeper than a customs union because it promotes the proper functioning of trade. Each member acknowledges that each product manufactured by the members of the group is suitable for sale, distribution to all members and human consumption. Exchange rates When a company starts to operate abroad, dependence on its domestic market decreases and risks can be dispersed, especially with regard to exchange rates according to business case studies. For example, as BCS claims, when a company supports most of its trade in U.S.
dollars, it may be advantageous for that company to trade with Japan in order to spread the currency risk between the dollar and the yen and thus create an advantage for the company. International trade creates rivalries between nations due to competition in foreign markets. Ultimately, it can lead to wars and disrupt world peace. Even though international trade has the potential to improve the living conditions of billions of human beings on our planet through welfare gains, there remains a significant distribution problem with respect to this wealth gain. If trade is done without barriers, even an efficient company can be burned by a foreign rival with a crowded out pricing strategy. For example, a foreign company with deep pockets could launch its products in the U.S. market to expel all others from the market. As soon as this happens, the company will be in a monopoly position and will be able to evaluate accordingly.
Some free trade agreements allow retaliatory rights when such measures can be proven. Cultural risk In addition to politics, cultural differences could create problems for companies that want to trade abroad. Failure by UKTI states to take different cultures into account can lead to damaging and costly mistakes. This can range from insults by an inexecent protocol to inappropriate packaging and marketing. It goes without saying that the marketing of a given company in a Western country may differ from that of a country that is still developing and has different cultural habits and beliefs. Another problem with international trade is that the resulting fierce competition will encourage companies to pollute our environment to the full.