Questions for Discussion
1. NAFTA has been a ‘much talked about topic’ in the border states—such as Texas New Mexico, California, etc.—since its passage. Our Chapter asks the question on page 158, “Why do governments intervene in trade? For the purpose of this question, let’s consider that the passage of NAFTA is ‘government intervenes’ in trade? Thus, why did the U.S. Congress and the President sign the passage of the NAFTA act?
As our textbook illustrates, breaking down trade barriers between the US and Mexico has been extremely beneficial to both countries. Along the border, Mexico specializes in importing parts and materials, modifying them using inexpensive labor, and re-exporting them back to the United States. The US, on the other hand, specializes in using advanced technology to develop finished goods and services. Many of these goods flow back into Mexico. By lowering trade restrictions between the two countries, both have been able to profit.
2. What is the role of the World Trade Organization (WTO) in today’s economies around the globe? Give two or three functions/roles that the WTO serves in your answer.
The World Trade Organization regulates and oversees trade between its member countries. Unlike the General Agreement on Tariffs and Trade that preceded it, the WTO member countries are contractually bound by its decisions. Thus, when a member country is found to be guilty of violating an agreement, the WTO is able to fine the country and, if necessary, impose sanctions through other members. A primary benefit for members of the WTO is normal trade relations among its members. Guaranteeing that all members enjoy the same trade privileges helps insure smoother trade throughout the world.
3. After listening/reading our media story for Lesson 6, you will know something about Foreign Trade Zones (FTZ). Our media story, unlike our text—however, gives you a specific reference to the FTZ in Texas and the Dallas Fort Worth area. What role does FTZ play in the Dallas/Fort Worth economy? Which FTZ would you guess is most active—the DF/W airport TTZ or the Alliance TTZ? Why?
There are several Foreign Trade Zones in the Dallas/Fort Worth area. Considering over $100 Billion worth of merchandise flowed through Texas FTZs in 2012, it is certain that the four major FTZs in the DFW area are a large part of the area’s economy. FTZ 39 at DFW Airport is no doubt the most active FTZ in the area. Not only is the airport responsible for a large amount of international air transportation, but the FTZ is home to eight subzones. In contrast, FTZ 196 (Alliance) is much smaller and only hosts a single subzone.
Wild, J. & Wild, K. (2013). International Business: The Challenges of Globalization. (7th ed.). Upper Saddle River, NJ: Pearson.