Free Trade Zones Using Nissan Motor Mfg.

Free Trade Zones

Using Nissan Motor Mfg. Corp. VU.S. answer: Why Congress establish Free Trade Zones? What advantages Nissan assembling autos FTZ? How argue FTZs community?

Reasons for the Establishment of Free trade Zones (FTZ)

In the United States, free trade zones establishment is to provide procedural efficiency for firms wishing to engage international trade activities. The establishment of free trade zones by congress is for exempting operators in these zones or sub-zones from custom duty on imported commodities. The Congress makes specific mention of items that are exempt from duties to areas set as foreign trade zones. It is a form of privilege to public, private corporations to undertake operations within the boundaries of the United Nations. It acts as a measure to encourage effective competition and, encouraging economic growth.

Considering the cost of importing parts of Automotives, finished automobiles are imported at a 2.5% lower tariff (Sturgeon T., Memedovic O., Van Biesebroeck J., & Gereffi G., 2009.). These costs are higher for significant components of the Automotives. The intention of Congress in this case is to create a conducive environment that beckons investors to locate production plant within the U.S. boundaries. The location of these industries within the U.S. economy will provide an opportunity for employment and exploitation of the local resources (Sturgeon T. et al., 2009.). The U.S. will also benefit from other revenues other than those foregone in custom exemption.

Advantages to Nissan for establishing autos in an FTZ

Other than the exempt taxes, Nissan stands to benefit from reduced cost of transporting finished commodities into the U.S. economy. The costs associated with shipment of finished products are three times higher that the costs of transporting components parts. The assembly of these products within an identified creates an opportunity to explore market potentials and needs and specifically meeting those needs.

Nissan can participate competitively in manufacture activities without facing restrictive cost of importing parts. This offers it an opportunity to explore measure to improve on efficiency using technological advancements. In the case "Nissan Motor Mfg. Corp. VU.S.," Nissan seeks to obtain operational efficiency by setting up a manufacturing plant within the FTZ. This is with the intention to, increase efficiency and capitalize on lower costs because of the zero rated custom duties.

Nissan can earn more revenues by exporting to related markets and, given the lower costs of operation it will come out successfully in the international market. This opportunity prevails so long as Nissan holds it operation in the FTZs identified. Expansions in operations can be realized and, the corporation will produce a wide range of automotive.

Disadvantages of FTZs