It is essential to recognize that in the world of serious business, along with opportunities for real economic growth, companies face the potential threat of financial and reputational collapse and decline. This ambiguity of possible outcomes is primarily due to the increase in the number of competitors in the industry, dictated by the expansion of the zone of influence under free trade. It is essential to specify that free trade in economic theory and practice is traditionally accepted to refer to agreements prescribing the facilitation of tax and customs regimes for trade between countries (Barone). In other words, as a result of the agreement, national companies get the opportunity to enter the world market more smoothly.
Nevertheless, there are a number of significant problems in emerging globalization that is stimulating the position of the free economy. For example, when countries become too dependent on each other, the possibility of conflict between them harms the conglomerate or large allied companies’ operation. In addition, the active intervention of foreign goods in the local market undermines domestic production and inhibits protectionism (Amadeo). If domestic companies’ characteristics are initially uncompetitive, they can hardly compete on an equal footing with strong companies from abroad. At its core, the idea of free trade can be destructive since it entails the reorientation of large market players. The companies are developing harmoniously in the state’s territory; having received the opportunity to move branches to a neighboring country, they lose the original vector of movement, eventually turning into an empire. This metamorphosis can be painful for the organizational structure of the company, leading to staff reductions and the abandonment of the mission and vision.
Nevertheless, free trade as a phenomenon must remain, as it strengthens inter-state relations. Moreover, from the point of view of classical economics, there is nothing wrong with increased competition (Twin). Nevertheless, the state on whose territory economic intervention takes place must stimulate domestic small and medium-sized businesses, so there should be incentive programs. In turn, even despite multinational companies’ presence, I continue to buy products in local stores and farmers’ markets, protecting the interests of local businesses.
References
Amadeo, Kimberly. “Free Trade Agreements with Their Pros and Cons.” The Balance, 2020.
Barone, Adam. “Free Trade Agreement (FTA).” Investopedia, 2020.
Twin, Alexandra. “Competitive Advantage.” Investopedia, 2020.