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Advantages and Disadvantages of Free Trade Agreement (fta)

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  1. Outsourcing
  2. Reduction of tariffs on imports allows foreign industries to expand to other countries. Application of outsourcing sometime causes unemployment problem in the domestic economy. Multi-national companies may outsource jobs to emerging market countries without adequate labor protections. It means that the smaller economy may suffers more by FTAs.

  3. Intellectual property
  4. Law for the protection of new inventions and development are not available in many countries or the laws they do have are not always strictly enforced. As a result, the valuable invention and ideas may be stolen.

  5. Crowd out effect of domestic industries
  6. If foreign goods are imported freely, the domestic industries of the developing countries would not be able to develop rapidly due to the superior strength of foreign industries. In many under developed countries the largest sector of employment is agriculture sector. These small family farms can’t compete with subsidized agri-businesses in the developed countries. As a result, they lose their farms and must look for work in the cities. It means that the smaller economy may suffers more by FTAs. This aggravates unemployment, crime and poverty.

  7. Degradation of natural resources
  8. Emerging market countries often don’t have many environmental protections. Free trade leads to depletion of timber, minerals and other natural resources. Deforestation and strip-mining reduce their jungles and fields to wastelands.

  9. Destruction of native cultures
  10. As development moves into isolated areas, indigenous cultures can be destroyed. Local peoples may be uprooted. Many suffer disease and death when their resources are polluted. Sometime, the importer may import expensive and harmful foreign goods.

  11. Reduced tax revenue.
  12. Many smaller countries struggle to replace revenue loss because of import tariffs and fees.

  13. Empire-Builder
  14. Under free trade, the foreign traders particularly the dominant ones may try to become empire-builders in future. In the past free trade gave rise to colonialism and imperialism

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