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Free Trade Effects on Multinationals and SMEs, Essay Example

Pages: 2

Words: 475

Essay

Identify who are the stakeholders?

A Stakeholder can be described as an individual or group that has interest in the operation of a company. Stakeholder often take part in decision making, depending on the agency of the situation.  Some of the stakeholders in free trade are:

 Customers

Customers gets the benefit from low prices for products and services that are manufactured locally or imported. Furthermore, standardization and improvement of products and services due to completion ensure customers get quality products.

Government

A government is the power of the country that governs authority that consists of arbitrators, legislators, and administrators.  The government ensures that firms that benefit from free trade comply with laws and regulation of the country. The government may require companies setting up subsidiaries to maintain environmental safety and also offer competitive wage rates to local workers.

Grassroots producers (entrepreneurs and workers)

Grassroots producers are the primary stakeholders and beneficiaries of free trade. But distinctions must be made between different types of labor contract and various kinds of entrepreneurs. Impacts may differ significantly between casual and permanent employees, between entrepreneurs and workers, small and micro-entrepreneurs and so on.

Shareholders of Private Firms

Reduced labor costs and market penetration eventually increases the value of companies. This usually raises share prices of companies engaging in cheap and viable foreign investment.

Donor Agencies and Trade Unions

Donor agencies tend to finance SME’s while trade unions negotiate for better duty rates. Introducing free trade will undoubtedly affect level of donations and existence of trade unions.

  • Who are most affected by the issue under consideration?

Entrepreneurs and workers

Entrepreneurs will experience low labor cost, therefore scaling up their operation won’t be difficult for established business. When firms outsource their core services to cheap countries, employment is reduced in the home country. The worker is hence left to settle for low wages.

Customers

Free trade allows for customers to import certain products duty-free. This is reflected in an affordable commodity price. The government losses on tax, but the citizens get relaxed prices on goods.

  • The potential impacts on the different stakeholders

Industry Growth mean higher capital gains for shareholders

Companies that expand to other countries while taking advantage of free trade always give an excellent return to their shareholders. For example, Apple has exhibited high growth in its share price over the past decade as a result of placing their core manufacturing operations in China.

Government does not get corporate tax

The government only gets foreign investment but no corporate tax. Foreign firms will often remit their taxes back home. However, GDP increases as foreign investment increases. Moreover, when more local are employed, more income tax is collected.

References

Chadee, D. D., Roxas, B., & Rogmas, T. J. (2015). Prospects and challenges of free trade agreements : unlocking business opportunities in Gulf Cooperation Council (GCC) markets. Houndmills: Palgrave Macmillan.

Hill, C. W. (2014). International business : competing in the global marketplace. New York: McGraw Hill Education.

Hopper, P. (2012). Understanding Development. New York: Polity Press.

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