The pros and cons of free trade show us that any nation that opts for an agreement must take proactive steps to protect its resources and human beings from exploitation without resorting to protectionism. Through international trade, economically lagging and underdeveloped countries are able to import machinery and capital goods against their raw materials, agricultural products and food. 4. There may be less protection of intellectual property because of free trade. Intellectual property rights are not always taken as seriously by international governments or their business rivals as in their home countries. Patents, processes and other inventions, including branding, graphic screens and imagery, are sometimes copied as part of free trade. This disadvantage reduces the ability of a company to create new jobs at the local level while offering decent wages. International trade can have adverse effects on a country`s consumption behaviour due to the importation of cheap and sometimes harmful goods. Indian handicrafts have suffered a serious relapse due to free trade and the unrestricted importation of English textiles.
Free trade agreements are treaties that regulate the tariffs, taxes and tariffs that countries collect for their imports and exports. The most well-known regional trade agreement in the United States is the North American Free Trade Agreement. From a strategic point of view, free trade can make a country vulnerable if it leads to the decline of critical industries. When a country becomes dependent on another country for critical products or services, it may be subject to political pressure and denied access to goods if the agreement is suddenly dissolved. In addition, a country that has a free trade agreement or preferential agreement with a neighbouring country can fight the extension of that agreement to other nations if it undermines its own position. An example is the time when Russia threatened to violate its trade agreement with Ukraine and impose tariffs on Ukrainian products when it sought to strengthen ties with the European Union. After all, there is always a political risk associated with international trade. Governments and their policies change over time, and sometimes companies with different rules that can address their sales and customers can get stuck in the middle. For this reason, it may be good to market products in a geographic region and not in a single country in order to compensate for the company`s risk. One of the main drawbacks of international trade is that cultural differences are often never documented.
These are the unwritten trade rules in the country, which are difficult to detect and can be even more difficult to resolve. Due to international trade, the products are produced not only for self-consumption, but also for export to other countries. The nations of the world can have goods that they have in international markets. The result is large-scale production and the benefits of large-scale production can be preserved by all countries in the world. 3. There is more risk to currency manipulation. When China reportedly tried to devalue its currency in response to U.S. tariffs, the stock market had its worst day in 2019. Second, the reality of the situation became clear to investors. The fall in the yuan makes Chinese products cheaper for American consumers. It thwarted the process of a tariff by creating lower prices through monetary policy.