Regional Trade Agreements
Entry into regional trade agreements has become a commonplace and the secret behind regional economic competitiveness and eventual success. A good example of the economic gains derived from such agreements is the case of EU which forms the largest economy in the world. The entry into these agreements pulls in foreign direct investments to the member countries. The foreign investments increase the economic activity and cause the net effect of increasing the GDP in the specific countries. An example is the estimated 0.5% increase in output that would accrue from the creation of an economic agreement between the US and EU. (Oliver Joy, 2016).
The adoption of these agreements also allows the free movement of labor and human capital across the borders of the member states. This aspect allows the easy transfer of expertise to the areas of need in good time. The free movement of labor serves as a two edged sword in stimulating economic growth. It first has the effect of creating employment opportunities for the citizens of the member states. This ensures an increased income per capita and thus higher living standards for the citizens, a relative measure for economic growth and development. On the other hand, the citizens employed in various institutions contribute to increased productivity which translates into high trade volumes hence increased GDP. ("Carnegie Endowment for International Peace", 2016)
The creation of an EU- US trade agreement will create more avenues for economic growth for both parties. The volumes of trade between the countries will contribute to increase in GDP, estimated to be $ 180 billion in a five year period. The free movement of labor will increase employment opportunities and output levels which eventually translate into increased per capita and GDP. The agreement would also be detrimental to either party due to the involvement in illegal activities by individuals who take advantage of the agreement. Such things as arms, drugs and substandard goods will easily access the markets. (Oliver Joy, 2016)
References
Oliver Joy, C. (2016). EU, U.S. aim to agree free-trade deal - CNN.com. CNN. Retrieved 10 May 2016, from http://edition.cnn.com/2013/02/13/business/eu-us-trade-deal-economy
Carnegie Endowment for International Peace. (2016). Carnegieendowment.org. Retrieved 10 May 2016, from http://carnegieendowment.org
