Importance Of International Trade And Agreement To Business Management Students

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The new trade theory places less emphasis on comparative advantages and relative input costs. The new theory of commerce states that, in the real world, one of the driving factors of trade is to offer consumers a greater choice of differentiated products. We import BMW cars from Germany, not because they are the cheapest, but because of the quality and brand image. In terms of music and cinema, trade allows the largest selection of music and movies to address different tastes. When the Beatles toured the United States in the 1960s, they exported British music – the relative cost of labor didn`t matter. The first critical factor is the removal of barriers to trade through trade agreements, government policies where countries agree to remove cross-border barriers and promote global integration. To understand the importance of trade agreements, it is necessary to keep in mind that countries have long used tariffs to protect local industries and businesses. Customs duties are taxes added to the price of imported international products. Since these duties are usually passed on to the consumer in the form of higher prices, the introduction of tariffs on imported products confers a price advantage on domestic firms and protects them from foreign competition.2 The objective of most trade agreements was to reduce or eliminate tariffs and other barriers in order to facilitate cross-border trade.

For multinationals, it is essential to recognise the importance of the Internet. Companies can not only reach new consumers, but also improve their business models. In addition, the internet offers companies the opportunity to build relationships with consumers around the world.