Faculty of Business Management & Professional Studies

ASSIGNMENT COVER SHEET

Programme: BACHELOR IN INTERNATIONAL BUSINESS

Code and Name of Subject: BLG20103
Lecturer’s Name: AP Asmahani Aswaddalai
Assignment Title:

Please note the Following:

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 Copying someone else’s work is plagiarism and is unacceptable
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one-sided A4 paper.
2. Submit your assignment to google classroom on or before 13 th May 2022. Late
submission will face a deduction of 2 marks per day,

Student Name ID No Signature

AHMAD HALIQ BIN HISHAMUDDIN 012021070407
YAGENTIRAN ANBALGAN 012021070283
MUHAMMAD ASYRAF BIN MOHD 012021070280
AZWAN LEE
DARISHINI KUPPUSAMY 012021070293

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Lecturer’s Name: AP Asmahani Aswaddalai
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INTRODUCTION
Free trade, also called laissez-faire, a policy by which a government does not
discriminate against imports or interfere with exports by applying tariffs (to imports) or
subsidies (to exports). A free-trade policy does not necessarily imply, however, that a
country abandons all control and taxation of imports and exports.
The theoretical case for free trade is based on Adam Smith’s argument that the division
of labour among countries leads to specialization, greater efficiency, and higher
aggregate production. From the point of view of a single country there may be practical
advantages in trade restriction, particularly if the country is the main buyer or seller of a
commodity. In practice, however, the protection of local industries may prove
advantageous only to a small minority of the population, and it could be disadvantageous
to the rest.
Since the mid-20th century, nations have increasingly reduced tariff barriers and currency
restrictions on international trade. Other barriers, however, that may be equally effective
in hindering trade include import quotas, taxes, and diverse means of subsidizing
domestic industries.
Free trade is a trade policy that does not restrict imports or exports. It can also be
understood as the free market idea applied to international trade. In government, free
trade is predominantly advocated by political parties that hold economic liberal positions,
while economic nationalist and left-wing political parties generally support
protectionism, the opposite of free trade.
Most nations are today members of the World Trade Organization multilateral trade
agreements. Free trade was best exemplified by the unilateral stance of Great Britain who
reduced regulations and duties on imports and exports from the mid-nineteenth century to
the 1920s. An alternative approach, of creating free trade areas between groups of
countries by agreement, such as that of the European Economic Area and the Mercosur
open markets, creates a protectionist barrier between that free trade area and the rest of
the world. Most governments still impose some protectionist policies that are intended to
support local employment, such as applying tariffs to imports or subsidies to exports.
Governments may also restrict free trade to limit exports of natural resources. Other
barriers that may hinder trade include import quotas, taxes and non-tariff barriers, such as
regulatory legislation.
ANALYSIS AND DISCUSSION

1) Free trade agreements are signed by two or more nations who seek to formalize their
economic cooperation and agree on trading parameters. Free trade agreements are
accords that govern how countries manage tariffs, taxes, and charges on their imports and
exports. Countries typically defend their own industries and enterprises without free trade
agreements. On the worldwide market, this protection left them stagnant and
uncompetitive. They got inspired to become actual global rivals when the protection was
gone. Because it fosters friction less trade, a single market is more comprehensive than a
customs union. Any member understands that every product produced by the group's
members is appropriate for sale, distribution, and consumption by all members. Local
businesses benefit from their global partners' access to cutting-edge technology. Job
prospects increase as local economies improve. Local personnel receive employment
training from multinational corporations. A free trade area's advantage is that it stimulates
competition, which boosts a country's efficiency in order to keep up with its competitors.
As a result, products and services improve in quality while costing less. Free commerce
enhances the overall growth of the economy. It provides for more efficient production of
products and services. This is because it promotes products and services to be produced
in areas with the finest natural resources, infrastructure, or skills and knowledge. It boosts
productivity, which can lead to greater long-term earnings. There is universal consensus
that growing global commerce has boosted economic development in recent decades.
Because more players may enter and join the market when there is free trade and tariffs
and restrictions are removed, monopolies are destroyed. The most common charge
leveled against free trade agreements is that they are to blame for job offshoring. Patents,
innovations, and novel methods are not protected by law in many developing nations.
They have laws, but they aren't often followed. As a result, businesses frequently have
their ideas stolen. Because member nations are no longer subject to import duties, they
must devise strategies to make up for the lost revenue.
Traditional home businesses may diminish as more nations undergo industrial growth.
Since the 1950s, the shipbuilding sector in the United Kingdom has been declining due to
foreign competition, and steel manufacturing is presently facing increased competition.
Protectionism can assist save employment in some industries, or at the very least delay
the pace of change. Nestle is having some issues with their popular bottled water Perrier.
Nestle has threatened to relocate Perrier manufacturing elsewhere before, most recently
in 2004 when 350 union members in Vergèze originally opposed the company's early
retirement plans for about 1,000 of its 4,000-strong French workforce. Nestle, which
purchased Perrier in 1992, sees this as an assault to its entrepreneurial independence and
wants to broaden the brand's reach, either by venturing into still water or developing
versions in other countries. The organization plans to appeal a Nimes administrative
tribunal judgement that upheld the municipality's re-branding. Nestle maintains it is
private property and that the marine does not have the authority to change its name. The
Swiss company claims to have increased output at Perrier by 20% and is spending €80
million in the facility, but it is up against an uphill legal struggle.

2) Protectionism may also aid the development of new industries. New enterprises may
struggle to compete in industries with high start-up costs if the government does not
provide assistance in the form of tariffs or subsidies. Such impediments can be lifted after
they have become competitive. Energy, water, steel, weaponry, and food are examples of
strategic businesses that might benefit from protectionism. For example, 'food security'
may be viewed as critical so that we can feed ourselves in the event that the global
commerce system is disrupted. Nestle (MNO) is promoting infant formula to poor nations
where it is being misused, resulting in harmful outcomes. The majority of the allegations
leveled against baby formulae center on the issue of discouraged breast feeding among
Third World moms, which has led to product abuse, resulting in newborn malnutrition
and mortality. Many parents in the Third World dilute the formula to stretch their supply.
The youngsters had never been breastfed and had been primarily bottle fed since infancy.
Nestle has been directly and indirectly accused of killing Third World infants for over 20
years. In 1974, a study with a brochure titled "Nestle Kills Babies" was issued.
Breastfeeding is still the best option for infants, according to Nestle. Mothers who are
unable to feed their babies their own milk for whatever reason should instead utilize
nutrition milk or mixed meals. Nestle began educating customers. WHO became
engaged, and the INBC stated their differences. The Nestle Infant Formula Audit
Commission was established by Nestle (NIFAC) NIFAC suggested that the code's
instructions be clarified in numerous ways. Nestle adopted the proposals in October 1982.
Adopting provisions of the WHO code as Nestle Policy is one of Nestle's policies.
Mothers may choose to continue breastfeeding in order to avoid being ostracized once
bottle feeding is associated with HIV infection. In 2004, demand for baby formula in
South Africa increased by 20%, prompting the government to examine shortages as
Nestle struggled to meet demand.

3) Such agreements may oblige us to accept goods and services that do not satisfy our
standards but are cheaper than those produced by domestic industries. There may also be
pressure to decrease our standards for workers' rights and environmental protection in
order for our businesses to compete with those in nations with lesser standards. Nestle
India Ltd. applauded the Indian Supreme Court's judgement on Jan. 3 to overturn interim
orders issued by the Indian Consumer Commission in 2015 against the business over its
Maggi brand noodles. After a government laboratory in Kolkata identified MSG and high
levels of lead in samples of Maggi noodles, a unit of Swiss consumer giant Nestle SA
decided to temporarily stop selling them in India. Shortly after the prohibition, Nestle
India destroyed almost 35,000 metric tons of the product. Nestle India was accused of
"unfair trade practices, sale of faulty products, and sale of goods to the public" under
India's Consumer Protection Act of 1986, for selling DiMaggio Oats Noodles without
product clearance. The prohibition was overturned by the High Court in August 2015,
citing a violation of "natural justice principles." After three authorized laboratories,
ordered by the High Court, confirmed that samples of the product were proven to be safe
for ingestion, Nestle India resumed selling Maggi noodles. The Supreme Court of India
received analytical reports on Maggi noodles from India's Central Food Technological
Research Institute. According to the studies, 100 percent of the samples examined by the
FDA had lead levels that were below legal limits.
4) Global free trade, according to neoclassical economic theory, would maximize
economic advantages while minimizing costs in individual countries and worldwide at
the same time. In practise, even at the national level, truly free trade has never been
attained since policy decisions are made not just to pursue pure economic benefit but also
to achieve other goals based on domestic political and strategic preferences. The strategic
linkage of FTAs and market liberalization to ASEAN Vision 2020 and the East Asia Free
Trade Area needs to be fleshed out in order to provide a clear picture of the benefits and
costs to regional countries in order to improve regional cooperation and create a seamless
East Asian marketplace. If the objectives are aligned with the principle of comparative
advantage and market conditions, the FTA and market liberalization will contribute to
regional growth and market liberalization. Domestic political, economic, and governance
reforms can help to reinforce and institutionalization these circumstances. It is critical to
liberalize trade in services in addition to lowering average tariff rates across a broad
variety of commonly traded items in the region. East Asian countries are especially
opposed to service sector deregulation, despite the fact that this sector has rapidly become
a dynamic, integrated driving force behind regional economic integration. Intra-regional
manufacturing networking requires services in logistic transportation, financing, banking,
telecommunications, tourism, information technology, and other professional services.
Other significant auxiliary areas of trade facilitation must be addressed in order to build a
seamless regional economy. These include issues such as customs harmonization, product
standardization, rules of origin (ROO), dispute resolution processes, and competition
policy. These policies are required to ensure the efficient and successful execution of the
region's burgeoning bilateral and regional free trade agreements.

5) Free trade is a trade policy that does not restrict imports or exports. It can also be
understood as the free market idea applied to international trade. In government, free
trade is predominantly advocated by political parties that hold economic liberal positions,
while economic nationalist and left-wing political parties generally support
protectionism, the opposite of free trade.

Most nations are today members of the World Trade Organization multilateral trade
agreements. Free trade was best exemplified by the unilateral stance of Great Britain who
reduced regulations and duties on imports and exports from the mid-nineteenth century to
the 1920s. An alternative approach, of creating free trade areas between groups of
countries by agreement, such as that of the European Economic Area and the Mercosur
open markets, creates a protectionist barrier between that free trade area and the rest of
the world. Most governments still impose some protectionist policies that are intended to
support local employment, such as applying tariffs to imports or subsidies to exports.
Governments may also restrict free trade to limit exports of natural resources. Other
barriers that may hinder trade include import quotas, taxes and non-tariff barriers, such as
regulatory legislation. Historically, openness to free trade substantially increased from
1815 to the outbreak of World War I. Trade openness increased again during the 1920s,
but collapsed during the Great Depression. Trade openness increased substantially again
from the 1950s onwards. Economists and economic historians contend that current levels
of trade openness are the highest they have ever been. Economists are generally
supportive of free trade. There is a broad consensus among economists that protectionism
has a negative effect on economic growth and economic welfare while free trade and the
reduction of trade barriers has a positive effect on economic growth and economic
stability.
CONCLUSION
At present times, no country in the world follows the policy of free trade. Every
country imposes some restrictions on the import and the export of goods in the broader
interest of the country. Conclusively, as the result our group search has pointed out, free
trade can be shown to be benign to the world as a whole but has never been proved to be
the best policy for a single country. The classical golden age of free trade no longer
subsists in the world. But, free trade concept has not been forsook since the case for free
trade is most vigorous in the long run. Aegis is a short term measure. Thus, the issue for
public policy is the best reconciliation of these two perspectives so that gains from trade
become the greatest. In recent times, most of the countries are members of the World
Trade Organization which favour more free trade than restricted trade. This philosophy
accumulated momentum in the Dunkel Draft and General Agreement on Tariffs and
Trade negotiations. The aims of both the GATT and now the WTO are trade
liberalization rather than trade restrictions.
REFERENCES

1. https://corporatefinanceinstitute.com/resources/knowledge/economics/free-trade-area/

2.https://corporatefinanceinstitute.com/resources/knowledge/economics/free-trade-area/

3.https://www.theguardian.com/business/2008/jan/16/europe

4.https://www.academia.edu/37011695/
Case_Study_Solution_of_Nestle_Fair_and_Lovely_McDonalds_Easycar_com_Coke_an
d_Pepsi_pdf

5. https://www.spglobal.com/marketintelligence/en/news-insights/blog/global-ma-by-the-
numbers-q1-2022.

6. https://www.britannica.com/topic/free-trade#:~:text=free%20trade%2C%20also%20called
%20laissez,or%20subsidies%20(to%20exports).
7. https://youtu.be/r6mN9shIl0o
APPENDIX
BLG20103 INTERNATIONAL TRADE 
ASSIGNMENT 2 
EXCELLENT  GOOD  MODERATE  NEED
(4) (3) (2) IMPROVEMENT
(1) 

Introduction is factual,  Introduction is Introduction is Introduction is

interesting and factual and  partially factual  fictitious,  boring
presented  creatively interesting but not and not creative and not creative.
in a creative  way

Supporting details are  Some details don’t Details are Unable to find
specific to topic and support the  report somewhat sketchy  specific  details
provide  the necessary topic 
information

The conclusion is strong The conclusion is The conclusion is The conclusion is

and  logical as well as logical and logical but  does illogical  and does
provides  clear summary adequately not summarize not summarize  the
of the topic. summarizes the the topic. topic.
topic.

Students provide 4 or Students provide 3 Students provide 2 Students provide 1 

more references using references  using references  using reference using
APA styles. APA styles. APA styles. APA  styles.

Prove of discussion – 4 Prove of discussion Prove of Prove of

or  more – 3  discussion – 2 discussion – 1 
only

Total Points: 

CRITERIA Total 

Introduction 
20% 

Analysis and  
Discussion 

40% 

Conclusion 
 15% 

References 
15% 

Appendix 
10% 
___ /100 
___ /20