Question

Lets discuss various multi country trade agreements. Most notable, lets talk about Brexit. As the UK leaves the EU, trade agreements have to be renegotiated. In the process, the location of production, distribution, warehousing facilities has to be reconsidered. Pick a company and discuss how changing trade agreements are affecting the location decisions

Answer 1

The various multi country trade agreements are:

1. Free trade agreement(FTA)- This is the region which encompasses a trading bloc where the trading members sign agreement to reduce trade barriers. tariffs and increase trade of goods and services.

2.Customs trade- It is a type of trade block where the participating countries set up common external trade policy.

3. A customs and monetary union- it is a trade block where the participating countries have in common an extra trade policy and share a single currency.

4. Economic Union- it is a type of trade block which is a combination of a common market and customs union. These countries have regulation on free movement of goods and services and factors of production and also a common external trade policy.

5. Economic and monetary union - when the economic union unifies the currency it becomes economic and monetary union.

With Brexit and the surrounding uncertainity over it, the most hit is the manufacturing sectors. The companies of various sectors are facing the heat as there is an uncertainity of how the Brexit would impact the job structure, the availability of cheap labour from across the border, the market availiablity etc. are the major concerns. Take for example, the car manufacuring company which has its main company in Germany and  its production unit is in China due to the availiablity of cheap labour and incentives provided by the government for such companies in China. The assembling unit is in India or any Africian nation. When there is a change in the trade agreements between the countries, the company will have to rechange its decision of setting the company units in some other place where the policies of the government would be favorable to them. Similary, the German company which had England as the best market would become costier for it due higher tariffs and customs duty that would be imposed by the agreement post brexit.