Homework Question on Trade Policies
- As we have learned, foreign trade policy can have a significant impact on domestic firms.
- Consider the firm you have chosen and address the questions below in a 2- to 3-page paper:
- Suppose the U.S. government removed tariffs in your industry. What impact would that have on your firm?
- What are some obstacles your firm might face with production in another country?
- Using at least TWO resources that you find on your own, make an argument FOR or AGAINST free trade. Be sure to discuss the advantages and disadvantages of which policy you support. (Wikipedia is not an acceptable academic resource for this course).
Homework Answer on Trade Policies
Trade policies adopted by different countries affects that way people or businesses conduct their day to day operations. These policies are meant to regulate and control certain sections of the economy. However, the effects may be felt in other sections hence leading to either profit maximization or losses for businesses. This essay deals with policies such as import tariffs in energy production.
American Electric Power (AEP) is concerned with the production and supply of electricity in America. The removal of tariffs by government has a positive impact to the company’s business (Young, 2009). This is because of the fact that the amount of tax that would be paid for importing raw material is scrapped. Thus, the operation cost goes down hence the firm makes huge profits as compared to when import tariffs by government were imposed (Johnson, 2013).
Production of electricity in another country by American electricity power will present the following obstacles. First, labor diversity between different countries affects business operation both in the short run period and in the long run period. High cost of labor leads to high cost of operation hence reduced profits. Another obstacle is about environmental laws in the country where active operations take place. This means that stringent measures will reduce the space for smooth operations hence unfavorable environment to invest in (Nath, 2013).