Which Of The Following Is Most Accurate In Regards To The Asian Free Trade Agreements

The benefits of unilaterally removing barriers to trade lie in particular in cases where the country does not manufacture the product; In these cases, the removal of barriers to trade increases consumer choice. (However, as mentioned above, an exception occurs in situations where the removal of a barrier to trade in a raw material or component that is not domestic-made increases the effective rate of protection of the final product.) Proponents of free trade argue that imposing import barriers, even if other countries do, is like shooting yourself in the foot. The opportunity to turn the other plays towards the trade barriers of other countries is based on an economic argument attributed to Adam Smith in the eighteenth century: consumption being the only end of production, the interests of consumers take precedence over the interests of producers, especially those of relatively inefficient producers. Taken to its logical conclusion, this strategy recommends that the U.S. government take no action to offset de facto subsidies to domestic consumers when imports are sold at prices below fair value. [28] Even when the country produces the product, increased competition through trade liberalization is likely to lead to lower prices for domestic firms. In this case, part of the consumer`s savings is then devoted to the consumption of other products. The amount spent on the consumption of other products will have positive effects on production, which will somewhat mitigate the loss of production of the company in competition with imports. The second factor that can affect a country`s current account is the exchange rate. The exchange rate refers to the amount of foreign currency that can be purchased by a country`s own currency. According to economic theory, one would expect the exchange rate to fall relative to its trading partners if a country has a persistent trade deficit – for example, if the US has a persistent deficit, the dollar would have to buy fewer foreign currencies like the euro or yen.

This would mean that imported products would cost more because they would require more dollars for each unit of foreign currency, which would lead to lower imports. In addition, U.S. exports are expected to increase as foreigners can buy more of their products for each unit of their currency. .

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