Regulation of free flow of goods across international borders is the basic idea of the concept of free trade regulation. On the surface, the idea of free trade trade regulation may look appealing to all countries, which may see such regulation as a way to protect their domestic markets. It may appear to be fair to the local manufacturers. As much as regulating free trade confers some advantages to members in the free trade region, there are some disadvantages that may not be obvious at first glance about free trade regulation. Although advantages are apparent, disadvantages may far outweigh benefits.
- Regulation of free trade involves the establishment of laws aimed at regulating the free flow of products from foreign destinations. Goods and services from other countries may be charged heavy duties and tariffs. In a nut shell, free trade regulation means the introduction and use of trade limitations and tariffs assessed on goods and services imported from other countries.
- When free trade is regulated, there is a disadvantage in limiting the consumer markets. For instance under free trade zones, using the NAFTA as an example, all countries in the region can target the consumers of the entire North American region as their primary market. This means that Mexico should have access to consumers living in New York City, Toronto and Chicago for example. The same holds true for American and Canadian companies: They can now have access to each other's consumer base. Yet applying free trade regulations would mean that the primary market of each country would be limited to their own borders. When these countries want to ship goods and services outside their home market, trade limitation rules such as tariffs and duties may be applied to their products.
- Free trade regulation could basically lead to protectionism measures. A country may use unfair trading practices and measures aimed at giving the country's home producers unfair advantage over other countries. The problem here though is that other nations may try to retaliate against such protectionist measures by imposing their own trade protectionism measures. This is a barrier to global commerce, to say the least.
. - All countries in the free trade regions compete with one another. The idea of signing such pact is to allow free flow of trade between such countries in the pact. Regulating free trade could also boost and protect domestic producers from the competition of other countries overseas. For instance, without NAFTA, the Mexican industries would be protected through free trade regulation from countries such as the United States or Canada whose manufacturers obviously have advantages over Mexican producers, especially through superior technology.
- When trade regulation policies prevent free trade and the unrestrained flow of goods and services across international boundaries, it may help boost the profitability of domestic companies. Look at it this way, products coming in from other nations under free trade regulation are charged tariffs and other duties and taxes. As a consequence these imported goods become more expensive than the locally produced goods. Locally manufactured products are much cheaper than imported goods. This means that the domestic consumers may buy more of the locally made goods, thereby boosting the profitability of local companies.
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