General Agreements In Economics


Trade unions and free trade agreements can expand global trade and well-being or reduce well-being, depending on whether they create new business models based on comparative advantages or simply divert trade from a more competitive non-member to a member of the trading bloc. In 1950, economist Jacob Viner defined the creation of trade as the situation in which a member of a preferential trading bloc has a comparative advantage in the manufacture of a product and can now sell it to its free trade countries because of the removal of trade barriers. As a result, many countries have shifted from the multilateral process to bilateral or regional trade agreements. Such an agreement is the North American Free Trade Agreement (NAFTA), which came into force in January 1994. Under NAFTA, the United States, Canada and Mexico agreed to eliminate all tariffs on merchandise trade and reduce restrictions on trade in services and foreign investment for more than a decade. The United States also has bilateral agreements with Israel, Jordan, Singapore and Australia and negotiates bilateral or regional trade agreements with countries in Latin America, Asia and the Pacific. The European Union also has free trade agreements with other countries around the world. Countries following the neo-Marxist model have generally encouraged education and high national savings to finance their expanding export industries. For example, in Japan, the savings rate has often exceeded 20% of GDP and is now approaching 40% of China`s GDP. (In contrast, over the past decade, the U.S.

savings rate has been only about 2% and has even been negative in a few years.) In analyzing the impact of a surplus or deficit, economists often consider “trade” very far in the definition. In general, economists do not consider simply the balance of trade in goods, such as the “current account balance,” which includes the trade balance of goods and services, as well as net income from international income (profits transferred from foreign investments, royalties, interest and dividends) and unilateral transfers (foreign aid and transfers of individuals to be relevant).

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