Thursday, March 8, 2018

11 Countries Seek to Improve Trade

Eleven countries are promoting sweeping changes to reduce tariffs and new trade rules called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The action is being taken as an attempt to ensure that the concepts of free trade and increased trade improve economies and lives. Some of this makes sense from a policy standpoint.

Free trade is great and improves economic development. Countries that have porous trade borders gain advantages in terms of technology, wealth, and new ideas. This occurs because as they move their products overseas they generated wealth, and as they buy products from overseas they improve the wealth of others.

Hypothetically, each country in a free trade area gains specialization advantages to focus on what they do best and this raises overall wealth. For example, if England produces better and cheaper sheep than Peru then they would focus more on sheep and purchase cheaper products from overseas raising wealth in both countries.

Yet there is risk in this for some countries because apples are not exchanged for apples. Resources and products move throughout many countries making actual tracking difficult. It is more like apples trading for bananas, pineapples, carrots, and peanuts. It is all jumbled up and some countries can lose.

There are also those who cheat the system and don't share the true cost of their manufacturing. They may damage the environment, violate rules of the agreements, and take advantage of their partners. In this case, the agreement would need to have a strong mechanism of enforcement, better supply chain tracking, and overall development of protections from abuse.

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