Nissan Motor Manufacturing and U.S. free trade zone advantages

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.

Disadvantages of FTZs

The location of FTZs within a region encourages steeper competition for local industries that have little capacity to expand. The increased influx of multinationals in an area such as Tennessean will erode protection to local companies that custom duty offers. In essence, this implies that a corporation as large as Nissan can easily take over the U.S. automotive industry given it potential to advance both in technology and size. Considering setting up of the new production plant in, "Nissan Motor Mfg. Corp. VU.S.', it is clear that local companies cannot much up the potential displayed. To their disadvantage the level play field that customs protect is eroded.