Subject Business

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Foreign Trade Zones – areas created to relieve some of the costs associated with free trade. These areas are designated as “Custom Ports of Entry” where commercial merchandise may be held without being subject to custom duties and other taxes. (Satterlee, 2014). Internationally, these types of designated areas are known as free-trade zones.
In an article titled, “Free Trade Zones and the New World Order,” (Sapirie, 2015), the author discusses the history of foreign trade zones and the increase of their use in economies all around the world. Though we can see the use of areas similar to free trade zones as early as the 12th century, the United States first developed a foreign trade zone system during the Great Depression in order to boost commerce and attract foreign investment. (Sapirie, 2015). Free trade zones really expanded after 1959 when Ireland experimented with the use of a tax free zone in order to boost their economy. The experiment was an enormous success, and the zone generates 3.3 billion in trade every year. (Sapirie, 2015). This success has encouraged a decrease in trade barriers and the steady growth of free trade zones worldwide.

Even though there has been a significant increase in foreign trade zones in the United States and around the world, they do have some drawbacks, and they are not always successful. For example, India experimented with a variation of a free trade zone that ended up failing to attract desired foreign investment because of poor infrastructure and unstable fiscal policies. (Kumar, 2015). Failure to attract enough investment could result in economic losses. Additionally, the high cost of establishing a foreign trade zone sometimes makes it difficult to justify its creation. This is especially true in the United States which has some of the lowest tariff rates in the world. In recent years the tariff rates for certain products have decreased worldwide due to negotiations by the World Trade Organization. (Okumura, 2015). When tariff rates are relatively low, free trade zones are not as attractive as they are during increased regulation. But overall, trade zones are helpful to international business and they have positive economic effects globally. We will continue to see a steady increase of them here in the United States and around the world.

References
Kumar, V. (2015, January-June). Special Economic Zones in India: problems and prospects. Political Economy Journal of India, 24(1), 10+.
Okumura, Y., (2015). Free Trade Networks on Non-tariff Barriers. Journal of Industry, Competition and Trade, Volume 15, Issue 3, pp 223-238
Sapirie, M., (Feb 4, 2015), Free Trade Zones and the New World Order, Tax Analysts Tax Notes Weekly

Satterlee, B. C., (2014). Cross Border Commerce: With Biblical Worldview Applications, Raleigh, NC: Synergistics International Inc.