Andean community depicts the regional economic integration of geographically related countries. Such agreements are made to reduce the barriers among the neighbors and to enhance the friendly relations. Ecuador is a part of Andean community but now it is adopting the US currency. Owing to which, Ecuador has to face a number of merits and demerits. The given below is the discussion about what pros and cons do Ecuadorean government has for breaking free trade agreement from the Andean Community.
There are a number of economic benefits to the Ecuador government from the free trade agreement of Andean community. Firstly, the basic advantage to the government is the reduction of the internal tariff. The trade is to be done at many lower tariffs rates within the regional boundaries of its neighbors such as Bolivia, Colombia and Peru. Secondly, the free trade agreement provides the citizens of this geographical region to feel free to share the cultural, social and economic benefits. The provision of the common external tariffs and common transportation policies for the members and non-members are the greatest advantages to the Ecuador government. So, it can be said that the Ecuador government has the advantage in all the aspects from economic activities to the development of various industries (Lorena, Gomez, (2012).
Apart from it, there are a number of demerits that can be faced by the Ecuador government, if she decided to break the free trade agreement. The very basic disadvantage is of the trade diversion. The government loses the sovereignty to enjoy the common policies for economic activities within the boundaries. The government has to pay high tariffs for internal and external trade in the region. The cultural and social contacts of the citizens become limited. The employment patterns shift is leading to the high cost of labor. The competition among the markets of Ecuador and Andean community increases that leads to the increased costs of products. Import prices will be increased causing the increase in inflation rate. It disturbs the stable money growth of the region and the Ecuador (John, Kenneth, 2012).
Lorena, M., & Gomez, M. (2012). Pass-through in dollarized countries: should Ecuador abandon the U. S. Dollar? Research Institute of Applied Economics. Retrieved on 10 October 2014 from: http://www. ub. edu/irea/working_papers/2012/201216. pdf
John, J. W., & Kenneth, L. W. (2012). INTERNATIONAL BUSINESS: The Challenges of Globalization. Prentice Hall. Retrieved on 10 October 2014 from: http://www. learningace. com/doc/7715241/c27dfd4d33047f5c33f92640c6410dc0/chapter-8-regional-economic-integration