Background information
Nowadays, trading among countries has become widespread all over the world. Consumers
benefit from international trade since they can buy the products that their own countries
can not produce, they can buy some seasonal food that never appear in domestic market
during the same period of time in a year, or, they can buy the same product at a lower price
that is made by another countries. All of us are getting used to purchase products imported
from foreign countries, and the governments are trying to figure out some ways to both
protect consumers’ benefit from international trade and also to protect their domestic
industries from being seriously hurt by international trade. The World Trade Organization
(WTO) was created to be a guideline of international trade in this context. Hence, countries
are seeking to reduce trade barriers between themselves, and are trying to get more benefit
when trading with one another, therefore, they enter into free trade agreements where they
can almost eliminate trade restrictions. Free trade agreements are often created among
countries which locate very close to each other geographically and the whole area is called
a free trade area. The most well known free trade areas include the North American Free
Trade Agreement(NAFTA) among Mexico, Canada and USA, the entire European Union
that contains 27 countries, and also include the one we are going to discuss in this essay,
that is, the Association of Southeast Asian Nations and China Free Trade Area (ACFTA).
Theories in international trade and about ACFTA.
1.There are three main restrictions in international trade and countries usually use them to
manage their import and export. They are tariff, quota, and subsidy. When talking about
the free trade agreement and free trade areas, we focus the most on tariff. Tariff is a tax
that applied on either import products from foreign countries or export products from
home countries. The impact of tariff in a small country and a large country are totally
different.
First, if a small country apply a tariff on its import, it rises the price of import products in
domestic market, which makes consumers consume less, therefore, the tariff decreases the
total demand of the product. On the other hand, the higher price encourages producers to
produce more and increases the domestic supply of that product. After all of these changes,
the amount of import falls down due to the decrease in total demand and also the increase
