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Discussion 2 – China and Germany

I agree that there is no such thing as free trade as governments and in some cases countries form groups in order to protect themselves from other countries or groups. An example of this group formation of countries would be the European Union and NAFTA (North American Free Trade Agreement), both of these groups have made special trade arrangements with the members that benefit each other and give advantageous trade to each other and not to other countries that are not members. If free trade really existed then there would be no need to have these sub-groups that have special trade conditions, there would be no rules that affect anyone. The idea of free trade truly existing is almost unlikely never to occur for two reasons:

1. All countries have a self interest to address their key concerns first, so countries will not agree to terms and conditions are not in their best interest. For example the USA provides subsidies to farmers of corn and other grain since they are a major exporter, other countries are disadvantaged due to this US policy. Many times countries have taken the USA to the World Trade Organization to no avail.

2. Countries are not at the same stage of development so smaller less developed countries are not competitive with larger developed nations, so it is necessary to form a group and implement tariffs to protect their markets from external countries. An example of this would be CARICOM and the CSME agreement that would facilitate more inter-regional trade and allow the small Caribbean islands to negotiate with one voice with the bigger more developed nations.

2. Governments may impose import barriers if a certain industry is not ready to compete on fair basis with competitors in another country. Governments tend to facilitate industries that they deem are in the interest of the country through subsidies, incentives and imposing barriers from other companies/countries that can destroy the industry. For...