Impact of Covid-19 on International Trade: A Study on Free Trade and Multinational Enterprises

TRADE AND MULTINATIONAL
ENTERPRISES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Literature Review...................................................................................................................3
ANALYSIS AND DISCUSSION...................................................................................................5
Impact of Covid-19 on international trade.............................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................2

INTRODUCTION
Free trade is a merchandise policy that does not restricts imports and exports of goods
and services within the market space. It can also be considered as the free market idea applied
into international trade. Their major purpose is to provide services and products to be bought or
sold across international boundaries with few or no government tariffs, subsidies or prohibitions
to conquer their exchange. It is beneficial to enhance the world production along with world
consumption of internationally traded goods. It also able to wipe out inefficiencies and in-
equivalence among the countries and satisfying with innovative and benefiting with cheaper
goods and products. Firms offered their goods and services at low cost as they adopts for reduced
cost strategies with providing them higher and good quality products to their consumers. With
the help of free trade practices the firm allows their customers to purchase more and better
quality of products at lower costs (Sako, 2019). Thus, it helps in driving economic development
of the country.
This report will highlight the benefits and costs of free trade and its validity after the
Covid-19 pandemic era with the help of perception of different authors along with data analysis
in context of Sainsbury.
MAIN BODY
Literature Review
As per the view of Steenkamp and Ferreira, (2020), it has been stated that free trade is
mostly a theoretical policy under which the authorities enforce utterly no duties, obligations or
revenue on imports or huge amount of exports of goods and services offered by any firm. It is the
primary key to maintain a healthy global economy in which few efforts have been enforced to
complete the purpose of pure free trade policies. Free trade enables the firms to lower down the
prices for the consumers and thus enhance exports provide benefits to the economy of the
country along with providing better options of products within the market space. The benefits of
free trade includes the relative advantages such as by particularizing in products where countries
have lower possibility cost, there can be an enhancement in the economic financial aid for all
countries to specialise in those goods where they have a comparative rewards. Another aspects
they fulfil is that it enables the business to reduces tax obstructions that leads to trade creation
which occurs when consumption of goods and services switches from high cost producers to low
cost producers. From various studies it have been evaluated that when UK joins European

Economic Community, the prices of many imported goods leads to lower down the prices of
products.
Gammage, (2019) reflect in their study that free trade also enhances the export of
products and services and thus the employment level as well. It also enables the firm to enhance
the growth of the organization as it is one of the important contributor towards economic
development. With the involvement of free trade practices, the tariffs and quotas are eliminated
along with monopolies because more players can come in and join the market with this approach.
It also enables the firms to increase the variety of offered products among the society.
On a contrary note, Wang and Huang, (2021) states that no trade is exactly free from all
the restrictions and boundations of government as they still impose some measures to control
imports and exports. Most of the industrialised nations negotiate free trade agreements with other
nations which influence the tariffs, taxes and subsidies the countries can impose on their exports
and imports. Apart from various advantages the practices also offers few drawbacks as well
which explained as it also encourages job losses as tariffs tend to prevent job outsourcing by
keeping the prices of the products at competitive level. Duty free products that are imported from
foreign countries with lower wages costs less in comparison to tax included goods. It also
enables to generate poor working conditions as the developing countries rarely have related laws
to regulate and ensure safe and fair working conditions within the market place. Free trade is
majorly arises due to lack of government restrictions which arises numerous work related issues
within the country. The unrestricted trade may also arises high level of competition due to which
the businesses suffer reduced revenue.
From the perspective of Meyer, (2020), it has been evaluated that with the outbreak of
Covid-19 within the economy, there are new trade restrictions have been generated which
threaten the widen old trade divisions. Modern trade agreements have been created along with
range of policy areas including global flows of finance and labour. These agreements have been
generated for the betterment of economic growth. The rules influence the people and companies
that live and operate within them. The pandemic situation triggered shock in supply, demand and
trade. The demand of the consumers reduces due to lockdown policies. The situation highly
affects the whole trade situations within the market place as the authorities issued various trade
restrictions in order to fulfil the requirements through import and export.