A free trade agreement between Malaysia and US means that there are no barriers to trade between each other and goods and services are allowed to move freely between countries. However, this FTA has its advantages and disadvantages which will be discussed further. In 2005, Malaysia had an annual US$23 billion trade surplus with the US. By using FTA, Malaysia might obtain extra market access in the US, but the structural and legal rules by the US Trade Representative might limit the access. For example, according to the “rules of origin” like the “yarn forward rule” makes it difficult for Malaysia to export its textiles to the US even if the tariffs for it are lowered. Interestingly, it is predicted by US’ National Association of Manufacturers that it will be able to double its exports to Malaysia by 2010. This might seem rather one-sided or biased. Furthermore, it is a well-known fact Malaysia has relatively high tariffs. By establishing an FTA with the US, the tariff cuts which might be as drastic as 0% since it is a free trade agreement will affect Malaysia more, demanding a bigger sacrifice by Malaysia. This can bring a lot of impacts. For example, a huge tariff cut on tobacco and alcohol might bring a lot of negative externalities to the country which is trying to campaign against smoking as cigarettes now will be cheaper. Also, by eliminating or cutting down the tariffs, Malaysia won’t be able to protect against artificially cheap products from the US. US might dump its surplus agricultural products in Malaysia, thus affecting our local producers. This is especially because US provides agricultural subsidies, thus its agricultural products can be exported below the cost of production. Services are the most important sector of the Malaysian economy for employment, local participation, and social policy. The Malaysian Government has successfully ensured greater local ownership and participation through careful government policies over the last 50 years. Malaysia liberalizes its services sectors gradually, bit-by-bit to make it proportional to the growth of local services sector so that they can cope with the foreign competition. At the WTO, there is a positive list and only the sectors listed in it will be opened to foreign competition. This means that before, Malaysia has no obligation to liberalize and can do so at its own pace and conditions. However, after establishing an FTA with the US, there is a negative list and only the sectors listed can be exempted from US competition.
When we look at just a few of the specifics of our trade with the U.S., we find that:
The goal of North American Free Trade agreement was to eliminate barriers of trade and investment between the United States, Canada, and Mexico. The implementation of the agreement brought the immediate removal of tariffs on more than one-half of U.S. imports from Mexico and more than one-third of U.S. exports to Mexico. Within ten years of the implementation of the NAFTA agreement, all United States and Mexico tariffs would be gone. The only tariffs that would remain would be those that deal with U.S. agricultural exports to Mexico. However, these were to be slowly phased out within fifteen years of the initial implementation of the program. NAFTA also seeks to eliminate all non-tariff trade barriers.
Prior to NAFTA (Inc. April 2006), “… tariffs of thirty percent or higher on export goods to Mexico were common, as were long delays caused by paperwork…. NAFTA addressed this imbalance by phasing out tariffs over 15 years. Approximately 50 percent of the tariffs were abolished immediately when the agreement took effect, and the remaining tariffs were targeted for gradual elimination.” According to Kimberly Amadeo (2015), article 102 of the NAFTA agreement outlines its purposes which is to “Grant the signatories Most Favored Nation status, eliminate barriers to trade and facilitate the cross-border movement of goods and services, promote conditions of fair competition, increase investment opportunities, provide protection and enforcement of intellectual property rights, create procedures for the resolution of trade disputes, and establish a framework for further, trilateral, regional, and multilateral cooperation to expand the trade agreement’s benefits.”. This quotation, condenses the agreement by stating that the intentions of NAFTA which was an agreement created to ease trade on imports and exports, by eliminating tariff barriers, in order to encourage competition and venture opportunities. Although, free trade is supposed to bring wealth, strength, and prosperity it should also
Free trade is a policy that lifts all trade tariffs and barriers and thus encouraging the free movement of goods (imports and exports) between nations. Agreements to free trade establish free markets where countries can engage in trade in a free and conducive environment. This type of trade is made possible by free trade agreements made between countries. According to the International Trade Administration, these agreements help minimize barriers to exports form the US, protect their interests as well as enhance the rule of law in member countries. NAFTA is one of such agreements.
The United States free trade agenda includes policies that seek to eliminate all restrictions and quotas on trade. The advantages of free trade can be seen through domestic markets and the growth of the world economy. T...
Globalization has become one of the most influential forces in the twentieth century. International integration of world views, products, trade and ideas has caused a variety of states to blur the lines of their borders and be open to an international perspective. The merger of the Europeans Union, the ASEAN group in the Pacific and NAFTA in North America is reflective of the notion of globalized trade. The North American Free Trade Agreement was the largest free trade zone in the world at its conception and set an example for the future of liberalized trade. The North American Free Trade Agreement is coming into it's twentieth anniversary on January 1st, 2014. 1 NAFTA not only sought to enhance the trade of goods and services across the borders of Canada, US and Mexico but it fostered shared interest in investment, transportation, communication, border relations, as well as environmental and labour issues. The North American Free Trade Agreement was groundbreaking because it included Mexico in the arrangement.2 Mexico was a much poorer, culturally different and protective country in comparison to the likes of Canada and the United States. Many members of the U.S Congress were against the agreement because they did not want to enter into an agreement with a country that had an authoritarian regime, human rights violations and a flawed electoral system.3 Both Canadians and Americans alike, feared that Mexico's lower wages and lax human rights laws would generate massive job losses in their respected economies. Issues of sovereignty came into play throughout discussions of the North American Free Trade Agreement in Canada. Many found issue with the fact that bureaucrats and politicians from alien countries would be making deci...
For example: France is one of the most efficient manufacturers of wine. After signing the FTA it now becomes possible to import wine from France without paying any tariffs or duties. This ultimately results in an efficiency gain to the UK buyers.
International trading has had its delays and road blocks, which has created a number of problems for countries around the world. Countries, fighting with one another to get the better deal, create tariffs and taxes to maximize their profit. This fighting leads to bad relationships with competing countries, and the little producing countries get the short end of this stick. Regulations and organizations have been established to help everyone get the best deal, such as the World Trade Organization (WTO), but not everyone wants help, especially from an organization that seems to help only the big countries and those they want to trade with. This paper will be discussing international trading with emphasis on national sovereignty, the World Trade Organization, and how the WTO impacts trading countries.
Malaysia is located in the south-eastern Asia, bordering Thailand and northern one-third of the island of Borneo, bordering Indonesia, Brunei, and the South China Sea, south of Vietnam. Due to its locations, it has been colonised since the late 18th centuries by many countries. Since 1965, Malaysia has had one of the best economic records in Asia, with GDP average of 6.5% growth for almost 50 years. The economical development especially boosted during 1981 and 2003 under the governance of Prime Minister Mahathir bin Mohamad. Malaysia succeeded in diversifying its economy from dependence on exports of raw materials to expansion in manufacturing, services, and tourism. Also, the current Prime Minister continues to pursue pro-business policies .
While free trade is supposed to mean that governments do not interfere with trade by applying policies to affect trade, all governments do intervene in trade to give their country an increased financial advantage. The effects of the government policies are further discussed as well as how those policies affect free trade.
Free trade can be defined as the free access of the market by individuals without any restriction or any trade barriers that can obstruct the trade process such as taxes, tariffs and import quotas. Free trade in its own way unites and brings people together. Most individuals love the concept of free trade because it gives them the ability to move freely and interact in the market. The whole idea of free trade is that it lowers the price for goods and services by promoting competition. Domestic producers will no longer be able to rely on government law and other forms of assistance, including quotas which essentially force citizens to buy from them. The producers will have to enter the market and strive into to obtain profit.
Since it lacks of natural resources, Singapore needs to import mainly its sources from Malaysia especially fresh water. Malaysia also is the second largest export market after Hong Kong (11.6%). Other major trade partners are United States, Indonesia, China, and Japan. The major exports are machinery and equipment (including electronics and transport), consumer goods, chemicals, telecommunication apparatus, pharmaceuticals, and mineral fuels. With the activeness of the government in negotiating the eight free tra...
The relationship and cooperation in handling the issue in Southern Thailand between Malaysia and Thailand government since a long time ago, has become disappointed, frustration and unsatisfied. This is might be best description that has been looked up since the working relations between past Thai governments and their Malaysian counterparts was comes to Southern Thailand (Thanet, 2013). For the Thailand government, cooperation with the Malaysian authorities is really needed while in dealing with the separatist insurgents that often to the slip across the porous border from Thailand. Meanwhile, for the Malaysian side, through the sharing of same ethnicity and Islamic religion in the Southern Thai Muslims, was means that their politicians ought to have a key role to play in understanding and resolving insurgency issues in Southern Thailand. Therefore, it might can be seem in logically think that, without the help by the Malaysian government, the issues that regards to Muslim separatist moments in the Deep South would be difficul...
Under China-ASEAN FTA tariff elimination covers 90% of the goods traded between China and ASEAN countries. According to this FTA, average tariff rate of China for ASEAN goods would be 0.1% instead of 9.5%. Besides, if we compare China’s FTAs with Pakistan and ASEAN we will find ASEAN at great advantage as there is zero percent duty under China-ASEAN FTA on items which are covered under China-Pakistan FTA where there is some duty. The rate of tariff of plastic products for Pakistan is 5.5% to 6.7% but the same is zero for ASEAN countries. ASEAN has a clear advantage rendering Pakistani products less competitive [18]. This may be the reason why in spite of a gradual rising trend in export, the overall trade volume is very low.
Free trade is a form of economic policy which allows countries to import and export goods among each other with no government interference. In recent years there has been a general consensus in economist’s stance on free trade. They view free trade as an asset. Free trade allows for an abundance of goods with increased varieties and increased availability. The products become cheaper for consumers and no one company monopolizes an industry. The system of free trade has been highly controversial. While free trade benefits consumers it has the potential to hurt manufacturers and businesses thus creating a debate between supporters of free trade and those with antagonistic positions.