The Implications of Regulations and Laws on Free Trade

Abstract
With the growing call for economic integration across the globe, it is critical to
comprehend the world of free trade as well as its limitations. Trade among nations has been
practiced since mankinds progression of civilization to satisfy the needs and desires of human
beings. There are certain benefits when a country engages in free trade such as satisfying the
needs of humans and by generating more wealth for countries. In todays world, there is a global
push from different countries to be economically integrated through the membership of
agreements and organizations. With this continuing push for global commercialization,
companies are expanding their market opportunities beyond the borders of their host nation.
However, there are still barriers limiting free trade, and examples of these trade barriers along
with their rationales will be explored. Additionally, another barrier for businesses, extraterritorial
law, will be explored from its inception to their effect on U.S. businesses. These findings will
establish the basic foundations for citizens to comprehend the need for free trade and the current
limitations that prevent its full potential.

In todays global society, nearly all countries participate in trade and nearly all those
countries are liberalizing their trading rules with the countries they have strong relationships.
Free trade brings new economic opportunities as it lowers costs and eliminates barriers in the
trading process. Despite global efforts to capitalize on free trade opportunities, limitations to free
trade still exists for different reasons. It is important to understand the implications of laws and
regulations that affect free trade and international business. Human beings across the globe are
interdependent in each other whether they acknowledge it or not. Preferably, U.S. citizens as well
as the citizens of the world should understand the implications that free trade has in their ways of
living. By understanding the scope of international trade, citizens are in a better position to
formulate informed opinions and advocate for policies that promote free and fair trade across the
globe.
To begin to understand free trade and the regulations that limit it, it is important to
understand the need for trade and how trade has existed since early recorded history. Then, the
benefits of free trade must be understood from early economic theories to todays fiscal and
competitive gains. Then, the efforts to promote free trade must be recognized to understand the
international push towards economic integration through agreements and organizations. The
global effort towards integration allows for an understanding of the business opportunities
companies see when they engage in international business. Though with these global
opportunities, it is important to understand the limitations that countries place on free trade.
Additionally, it is equally important to understand extraterritorial laws, their origins, and their
implications today as the next level of regulations. These findings may serve to produce and
encourage a better informed society in ensuring that free and fair trade brings prosperity for all.
The Need for Trade

Trade serves as a medium that satisfied the fundamental needs of human beings.
Abraham Harold Maslow identified five levels of needs: physiological, safety, social, esteem,
and self-actualization (Mooij, 2004). The first two of these needs are essential to the survival of
human beings. Physiological needs refer to the internal management of the body through the
consumption of food and water, the allocation of time to sleep, as well as the opportunity to
eliminate digested waste (Mooij, 2004). Safety needs pertain to physical and emotional security
from the surrounding environment, which can be addressed through a domestic shelter such as a
home (Mooij, 2004). Since recorded history, these needs were fulfilled by natural resources such
as wood, metals, fruits, vegetables, grains, spices, and livestock (Galbraith, 2007). However,
early civilizations did not have all of these resources at their disposal.
In order to fulfill the needs of civilians, civilizations looked to trade with other
civilizations. There is evidence to support the idea that human beings have traded these resources
across history through a barter system, which is the direct exchange of one good for another
good (Galbraith, 2007). From these exchanges came the establishment of cities and metropolitan
communities. Additionally, as early civilizations developed, individuals were able to manipulate
raw materials and other resources to produce commodities. For example, the Chinese were able
to produce fabrics from silk and trade these fabrics with other civilizations such as the Romans
through the Silk Roads (Galbraith, 2007). Overall, Europe, the Middle-East, Africa, and Asia
were able to survive and coexist because they were able to trade raw resources and final products
through the silk roads, the Tigris and Euphrates rivers, or the Mediterranean Sea (Galbraith,
2007). The transportation of goods through different mediums reflect on the importance and the
benefits of trade for the development of societies.
What are the benefits of free trade?

Scholars throughout the ages contemplated the distribution channel of goods and
resources that would yield benefits to all consumers. They have also proposed theories about
more efficient methods in which to conduct trade. One of the most notable scholars is a Scottish
philosopher by the name of Adam Smith. In the eighteenth century, Smith published a book
abbreviated The Wealth of Nations, and in it, he laid out the basic foundations of todays free
market system (Bernhard, 1954). Smith argued that if an individual has a competitive advantage
an advantage in the production of a certain item relative to the production of others of that
same item the exploitation of that competitive advantage in the pursuance of personal wealth
will ultimately lead to an indirect benefit to society (Bernhard, 1954). Applicably, the same
observation applies to countries. If one country has the capacity to produce more items than
another country, then they should produce those goods for other countries (Bernhard, 1954).
Smiths theory, however, implied that a highly developed country should produce every
commodity in the world if the countrys production capabilities dominates those of the countries
from the rest of the world. Although Smiths theory of absolute advantage may have paved the
path for international trade today, other scholars have supplemented this field with other theories.
Decades after Smiths publication of The Wealth of Nations, an English economist named
David Ricardo introduced the idea of comparative advantage in the Ricardian Model. He
proposed that even though one country may not have absolute advantage of the production of
Product A, the countrys ability to produce Product A better than its ability to produce Product B
serves as the countrys comparative advantage (Krugman, Obstfeld, & Melitz, 2012). The
Ricardian Model provides the basis for a need in a country to specialize in the production of
specific products (Krugman, Obstfeld, & Melitz, 2012). Remarkably however, while a country

may specialize in the production of a certain product, that country may lose its comparative
advantage to other countries over a period of time.
The theory of International Product Cycle elaborates on a countrys loss of a comparative
advantage to another country. This normally happens when a developed country initially
introduced a new product, but an undeveloped country learned and specialized the production of
that product (Onkvisit & Shaw, 1997). There are five stages to the International Product Cycle:
local innovation, overseas innovation, maturity, worldwide imitation, and reversal. In the local
innovation stage, a developed country introduces a product in its domestic market. This stage is
followed by stage two, overseas innovation, in which the product begins to be exported to other
developed nations. In this stage, the production of this good becomes the initiating countrys
absolute advantage (Onkvisit & Shaw, 1997).
In the maturity stage, foreign competitors begin to manufacture the product to their local
markets. While the initiating countrys absolute advantage has transformed into a comparative
advantage, the exports of the initiating country do not decrease. Instead, the declining price of
the product allows undeveloped countries to begin importing the product (Onkvisit & Shaw,
1997). During the worldwide imitation state, undeveloped countries also become capable of
producing the product to supply their local markets. This global production of the product
reduces the exports of the initiating country, leaving the initiating country to supply the market
within its own borders (Onkvisit & Shaw, 1997).
Finally, in the reversal stage, the initiating country begins to import the product it created
from other countries, especially undeveloped countries. In this stage, the initiating country has
lost its comparative advantage to manufacture the product, making it a comparative disadvantage
(Onkvisit & Shaw, 1997). Since the production of the product has become a standard for

undeveloped countries to manufacture, the initiating country can only compete globally by
generating a more cutting-edge and better quality version of the product (Onkvisit & Shaw,
1997). While the International Product Cycle may explain the process of how a countrys loses
its comparative advantage, engaging in free trade is not a practice that should be avoided. If
anything, countries that engage in free trade benefit overall.
The benefits of free trade come in a rippling effect when a country specializes in its
comparative advantage. Through specialization and the engagement of free trade, countries use
their resources efficiently, thus increasing the productivity of their goods and services
(Langenfeld & Nieberding, 2005). Furthermore, the rising productivity of products allows
countries to increase their imports as well as their exports, aggregating market competition.
(Langenfeld & Nieberding, 2005). From the increased productivity as well as the increased
competition, the prices of goods and services drop as well as the rate of inflation (Langenfeld &
Nieberding, 2005).
From these drops, consumers gain a stronger purchasing power in a growing selection of
products from which to choose. With the rise of productivity, exports, imports, and competition,
along with the fall of prices and inflation, the rippling benefits of free trade can be empirically
verified. For example, the greater purchasing power of consumers is reflected through the
increase of national income per capita. It has been shown that income per capita increases by
three percent for every percent increase a country engages in trade relative to its gross domestic
product (Langenfeld & Nieberding, 2005). For example, from the United States increased
engagement in free trade from 1992-2002, the average U.S. household increased its income by
$20,000 (Langenfeld & Nieberding, 2005). This increase in average income can be attributed to

the North American Free Trade Agreement (NAFTA), which is one several agreements that aims
to promote free trade between countries.
Efforts to Promote Free Trade
Internationally, countries in distinct regions of the world have trade agreements to
enhance the competitive production of goods within that region. Several of these trade
agreements include NAFTA, the European Union (EU), the Central American Free Trade
Agreement, the Association of Southeast Asian Nations, the Commonwealth of Independent
States, the Common Market of the Southern Cone, and the Organization of Petroleum Exporting
Countries (Pride, Hughes, & Kapoor, 2015).
Though these trade agreements have been approved and followed, they are not perfect in
promoting a greater quality of life among all participating nations. For example, while it was
previously stated that the average income in the U.S. has increased after NAFTA, there has also
been an increase between labor and capital in Mexico (Blecker, 2014). Robert A. Blecker, a
professor of economics at American University, stated that in order to have a prosperous region
in North America, NAFTA members would have to implement a wide range of complementary
policies, including maintaining competitive exchange rates, investing in the necessary public
infrastructure and education, and addressing the development gap between Mexico and the other
two NAFTA nations (2014). Blecker noted that NAFTA would need a system similar to the EU
in which regional development in these areas are funded by member nations. For example, after
Greece, Ireland, Portugal, Spain entered the EU, they were able to progress in social aspects like
education and infrastructure (Blecker, 2014). As more needs to be done to promote free trade
while improving the quality of life of all member nations, there are continual efforts to integrate
the world.

One notable effort for global integration has appeared in in recent news. Talks of a new
trade agreement, the Trans-Pacific Partnership (TPP), has emerged between countries that
neighbor the Pacific Ocean Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. This potential
agreement will affect at least 44 percent of U.S. exports since the Pacific region is the largest
market for U.S. exports (Office of the United State Trade Representative, n.d.). Overall, the TPP
would reduce trading tariffs among member nations while setting common standards for property
rights, environmental laws, as well as labor laws (Ryan, 2015). Another effort for global
integration includes Chinas New Silk Road project. The mainland route would connect China to
Europe as it passes through Russia and the Middle-East; the naval route would connect China to
Europe as it passes through Southeast Asia, India, Africa, and the Mediterranean Sea (Ryan,
2015). While countries continue to promote free trade and economic integration, there is an
international organization devoted to global free trade.
The most notable body that coordinates international trade is the World Trade
Organization (WTO), which is the successor of the General Agreement on Tariffs and Trade
(GATT). Similar to GATT, the WTO consists of hundreds of member nations from across the
globe that aims to promote free trade within all member nations by having member nations to
apply tariff implementation or reduction equally to all member nations (Onkvisit & Shaw, 1997).
Unlike the GATT, however, the WTO has a stronger system to handle trade conflicts through
specific guidelines for negotiations. Every effort to promote free trade is done through
negotiations within WTO members (Onkvisit & Shaw, 1997). As countries continue to be more
economically integrated than ever before, companies see the opportunities of the international
market.

Why Do Businesses Go Internationally?

Under the free-market economic system, private businesses that produce the same goods
or services would compete against one another to supply the majority of the market. In their
attempt to fulfill a social need, they are motivated to earn a profit by spending less than they
receive in revenue (Galbraith, 2007). According to Ansoffs Matrix Model, there are several
ways businesses can generate more revenue: market penetration, market development, product
development, and diversification (Richardson & Evans, 2007). In market penetration, a company
promotes the sales of an existing product in the same market by pushing for the greater
consumption of the product and by increasing the market share against the companys
competitors. In market development, a company ventures into new markets and encourages the
sale of their existing product. In product development, a company sells to its current market an
innovative product or a version of the product with new extensions. In diversification, a company
produces a new product and directs that product towards a new market. While these four
methods aim to grow companies, market development is unique to international businesses
because the global market is larger than any national market.
Under market development, businesses are not limited to reaching a larger market within
domestic borders. Instead, businesses gain more capital by going beyond local, state, and
national borders. General Electric (GE) has understood this concept as GE took steps to compete
in the global market. For example, while the market for the products of GE was declining
domestically in the 1980s, foreign markets, particularly countries like Mexico, China, Indonesia,
and India, were still demanding GEs products. This prompted GE to transition from a UnitedStates-based firm into an international corporation (Onkvisit & Shaw, 1997). Businesses
competing in the global market increase their revenues as well as their capabilities to be

successful within their industries. However, while entering the international market may seem
like a simple objective for businesses, they are subject to government regulation.
Trade Regulations and International Trade Laws
Governments enact different methods limit trade with other countries. Several of these
barriers include tariffs, import quotas, embargoes, foreign-exchange control, and currency
devaluation (Pride, Hughes, & Kapoor, 2015). Opponents argue that these restrictions on free
trade limit consumer choices and raise prices for goods and services (Pride, Hughes, & Kapoor,
2015). Proponents, however, argue that these restrictions equalize a nations balance of
payments, retaliate against the restrictions of other countries in geopolitical conflicts, and protect
new and weak companies along with national security interests and the well-being of the
countrys citizens (Pride, Hughes, & Kapoor, 2015). Today, the U.S. federal government still
opposes trade restrictions for these reasons. One of the oldest regulating components of trade
from the federal government oddly comes from the United States Department of the Treasury.
The Office of Foreign Assets Control (OFAC) falls under the umbrella of the United
States Department of the Treasury. OFAC aims to ensure the success of national security and
foreign policy objectives by sanctioning certain countries due to the United States political
tensions with those countries. Until the sanctions are lifted, U.S. companies cannot do business
with or in a foreign country that is specifically identified by OFAC. The Specially Designated
National and Blocked Person (SND) list is the primary list of sanctioned countries, persons, and
organizations (U.S. Department of the Treasury, n.d.). There are also other lists that accompany
the SDN list, such as Sectoral Sanctions Identifications List, Foreign Sanctions Evaders List,
Non-SDN Palestinian Legislative Council List, and the Non-SDN Iranian Sanctions List (U.S.
Department of the Treasury, n.d.). The United States government has a sanction program for each

individual country that derive their authorization from different sources such as executive orders
or statues. These statues include the Comprehensive Iran Sanctions, Accountability, and
Divestment Act (CISADA), the International Emergency Economic Powers Act (IEEPA), the
Foreign Narcotics Kingpin Designation Act, and the USA PATRIOT Act (U.S. Department of the
Treasury, n.d.).
A recent example of OFACs actions pertains to the recent dispute between the United
States and Russia over Russias annexation of Crimea. Sanctions were applied to Russias
defense, energy, and financial institutions. Defense companies were placed on the SDN list and
certain products in the energy industry were prohibited from being part of any transaction
(Newcomb, Sanchez, Levinson, & Prevas, 2014). In addition, all three industries are subject to
restricted maturity dates on debts of maximum thirty days (Newcomb, Sanchez, Levinson, &
Prevas, 2014).
While OFAC may limit business opportunities until Russia signs the Minsk Agreement
Peace Plan or until another alternative is presented, OFAC is also currently working towards
relaxing the economic relationship between the United States and Cuba. Several potential
sanction changes include increase travel to Cuba, expanding exports as well as imports,
promoting a modern telecommunications system, and connecting banking institutions to allow
greater usage of debit and credit cards (Newcomb, Stern, Levinson, & deButts, 2014). This
deregulation of a half-century policy will allow people, banks, and businesses to find new market
opportunities in Cuba and vice-versa. As OFAC continues to limit trade with Russia and
liberalize opportunities with Cuba, the destiny of market opportunities in the Middle-East,
however, still remain uncertain.

The markets as well as business opportunities in the Middle-East are selective and
minimal due to the Arab-Leagues boycott on Israel. Under the United Nations Partition Plan for
Palestine in 1947, land was divided between a Jewish state, an Arab state (Palestine), and an
autonomous City of Jerusalem. However, an Arab League Egypt, Iraq, Jordan, Lebanon, Saudi
Arabia, Syria and Yemen promoted the boycott of Israeli goods across the League and the
Palestinian state (Turck, 1977). This is the first level of the Arab Leagues boycott of Israel.
After Israel gained independence and Palestinian land in the aftermath of the Arab-Israel
War, the Central Boycott Office (CBO) was established by the Arab League to monitor the
second and third level of the boycott. The second level prevents companies that economically
engage with Israel to engage in business with the Arab League (Turck, 1977). The third level
prevents companies from conducting business with the Arab League if they are conducting
business with companies that have an economic relationship with Israel (Turck, 1977). The
companies and countries that have financial ties to Israel are said to be blacklisted and cannot
be removed from the backlist until they relinquish their relationship with Israel (Turck, 1977).
Additionally, Zionist in Israel are also boycotting goods from the West Bank and the
Gaza Strip. After 1967 when countries Egypt, Syria, and Jordan failed to diminish Israel in
the Six Day War, Israel was able to gain Palestinian territory of the Gaza Strip and the West Bank
(Vick, 2015). These Zionists disapprove Israels occupation of the two territories, prompting
them to boycott the acquired territories (Vick, 2015). Even recently in 2005, a Palestinian
organization known as Boycotts, Divestments, and Sanctions (BDS) has been favored by
Europeans countries for its efforts to implement stronger measures against Israel through
boycotts, divestments cutting business relations with companies that also do business in Israel
and sanctions (BDS National Committee, n.d.). With the amounting pressure to boycott, it may

seem as if the stage is set for U.S. businesses complying with the boycotts in order to do business
in the Middle East. However, they may be punished for complying with the boycotts.
The Export and Administration Act (EAA) is another U.S. policy that regulates
international trade and commerce. Amendments were added to the Export and Administration
Act to prohibit U.S. companies from complying with foreign boycotts against countries who are
friendly to the United States (Bureau of Industry and Security, n.d.). While this provision applies
to all boycotts, it is primarily known by its application against the Arab-sponsored boycotts
against Israel. The Office of Antiboycott Compliance under the Export and Administration Act is
the designated office that monitors U.S. businesses from complying with the boycotts or from
engaging with companies known to be boycotting Israel (Bureau of Industry and Security, n.d.).
Companies that comply with the boycott may be subject to harsh fines, imprisonment, omission
of tax benefits, and removal of legal permission to participate in international business (Bureau
of Industry and Security, n.d.). It can be said that U.S. businesses are the biggest victim of this
situation because a former Israeli Minister of Commerce stated, The Arab boycott means
nothing to us. It has no effect on Israel (Turck, 1977). With the inability to comply with
boycotts and without a solution Israel-Palestinian conflict, U.S. businesses lose opportunities in
both the European market due to divestments and Arab countries due to their opposition of Israel.
The Office of Foreign Asset Control and the Office of Antiboycott Compliance are a
narrow examples of the United States limitations on free trade. However, not only is the United
States engaged in the limitation of free trade, but the United States also restricts business
practices abroad. Since memberships into trade agreements and the WTO are voluntary and only
affects the procedures in which countries conduct international trade, there is a lack of official set
international laws that govern business practices specifically. (International Law - HG.org, n.d.).

The terminology international law in business does not refer to a set of laws from an
international governing organization like the United Nations. Rather, international law in
business refers to a sovereign countrys interactions with another sovereign entity (International
Law - HG.org, n.d.). Thus, this leaves single sovereignties to regulate the practices of their
businesses according to how they see fit, and in the United States, laws that can legally applied
to businesses outside U.S. jurisdiction are said to be extraterritorial laws (Onkvisit & Shaw,
1997).
Extraterritoriality of Laws
Before getting into the specifics of extraterritorial law, it is important to understand its
history and its intent. It has been historically observed that a sovereign government has the right
to govern within its own territorial borders. As times have changed, governments have practiced
the application of statutes outside its territorial boundaries when a situation seemed appropriate
to do so (DeRight, 2013). The concept of extraterritoriality can be traced to English common law
when a need to handle crimes that occurred at sea arose. For example, it seemed unjust for a
murderer to get away with his actions simply because the murder occurred on a British boat
overseas instead of the territorial boundaries of England (DeRight, 2013). Since then, legislatures
have made laws that would have extraterritorial application.
However, courts for the past century have extraterritorial application of the laws as well
as the limitations that should be applied to it. The limitations of extraterritorial laws in court are
referred to as the presumption against extraterritoriality (Dogde, 1998). The Supreme Court of
the United States has laid out basic principles for the extraterritorial application of a law: (1)
Congress must directly imply that the law can be applied abroad in certain domains, (2) and/or
the factors of an overseas case include domestic elements (Dogde, 1998). Even with these basic

guidelines, the Court has juggled the domestic factors that substantially constitute an
extraterritorial application. Three rules for substantiality include (a) the act occurs within the
U.S., regardless where the results are felt, (b) the results are felt within the U.S., regardless of
where the action occurs, and (c) the actions occur in the U.S. or have effects within the U.S.,
equaling an unrestrictive application of extraterritoriality (Dogde, 1998).
Since the inception of the concept of extraterritoriality and the continuing reviews from
courts, extraterritorial laws have ramified from murder crimes to illegal business practices. Laws
that have extraterritorial application include Civil Rights Act of 1964, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Foreign Sovereign Immunities
Act, the Foreign Investment and National Security Act, the Alien Tort Claims Act, the Securities
and Exchange Act, and the Foreign Corrupt Practices Act (Orrick, 2009). Congress had its
justification for enacting each of these laws and the Supreme Court has validated those
justifications since their enactment. However, it may be useful to review the application of one of
these laws and its consequences.
The Foreign Corrupt Practices Act (FCPA) is a well-known law in the United States
realm of international business. One of the provisions of the FCPA prohibits U.S. businesses
from bribing foreign lawmakers in order to receive government contracts, business favors, or
other competitive advantages (Wagner & Disparte, 2012). Overall, it aims to prevent the anticompetitive nature of bribery as it intends to secure a globally fair market (U.S. Department of
Justice and U.S. Securities and Exchange Commission, 2012). According to a report released by
the U.S. Department of Justice and the Securities and Exchange Commission, corruption
imposes enormous costs both at home and abroad, leading to market inefficiencies and
instability, sub-standard products, and an unfair playing field for honest businesses (2012). The

international community agrees that unethical businesses practices are harmful and therefore
must be diminished (U.S. Department of Justice and U.S. Securities and Exchange Commission,
2012).
However, some U.S. businesses leaders argue, the FCPA itself facilitates an anticompetitive environment. Other major countries do not enforce anti-bribery legislation while
other countries support the practice of bribery through their legislations and tax-deductibles
(Wagner & Disparte, 2012). This puts U.S. businesses at a disadvantage as they are punished for
conducting practices in which their foreign competitors are encouraged to do. For example, the
language of the near-four-decade-old legislation yields an indefinite meaning as to the
qualifications of bribery, making the act of bribery subject to U.S. standards. By the standards of
some countries, bribery are perceived as generous donations and considered part of practice of
business (Wagner & Disparte, 2012).
Not only does the extraterritoriality of the FCPA regulates the practices of U.S.
businesses with foreign nationals, but the FCPA also regulates the behavior of foreign companies
as well. In response to the United States domination to international white-collar crimes, the
United Kingdom passed the Bribery Act. The Bribery Act shifts this domination of applicable
extraterritorial laws to create an equal weight of extraterritorial governance from the two
sovereignties (Eastwood & Quinnen, 2011). Although, The Bribery Act has different provision
compared to the FCPA. For example, the FCPA is oriented around active bribery which is the act
bribing a government official. The Bribery Act not only covers active bribery, it also has a
broader application through its passive bribery provisions, holding those who accepted the bribes
accountable (Eastwood & Quinnen, 2011). Furthermore, while both the English law and U.S. law
may hold the company at large liable for the misconduct of its employees, the Bribery Act also

holds companies liable if the crime was commit by someone who was conducting business on
behalf of the company (Eastwood & Quinnen, 2011). Finally, while the FCPA requires a criminal
intention in order to be prosecuted, the Bribery Act does not require criminal intent. Instead, the
Bribery Act gives prosecutors discretion when applying the law (Eastwood & Quinnen, 2011).
While the Bribery Act acts similarly to the FCPA, U.S. companies doing business in England and
English companies doing business in the United States may now be subject to two different
pieces of legislations that have different definitions of bribery and different applications of the
law (Eastwood & Quinnen, 2011). This overlap in extraterritorial laws adds to the complications
of doing international business as well as the limitations of competition in a global market.
Trade regulations and extraterritorial laws prevents countries from experiencing the full
potential of a free trade in a global economy. Trade has fulfilled the needs of the worlds
consumers for thousands of years and continues to do so into the new millennia. The economic
and financial benefits of free trade are worth exploring in order to supply the global market with
goods and services in an efficient and effective manner. Studies show that free trade has brought
wealth to the U.S., but as the income inequality has increased between the U.S. and Mexico,
more work is needed to bring mutual prosperity between the two countries. With the growing
push from the international community towards economic integration as well as companies
initiatives to expand their industries abroad, consumers need to be aware about the realm of
international trade that gives them access to their goods and services.
Not only should consumers be aware about the benefits of free trade and the political
push for economic integration, but consumers should also be aware about the current setbacks to
free trade. The issues and the conflicting interests that motivate countries to have limiting trade
regulations inquire solutions that allows free trade to exist. As long as the U.S.-backed-Israelites

and the Arab-backed-Palestinians extend their territorial disputes, neither side may fully enjoy
the liberties of free trade. As long as the United States and Russia continue to play geopolitics,
both sides will be subject to sanctions the Russians suffering the worst economically compared
to the United States. Additionally, extraterritorial laws and their disjointed effort from countries
does little to enforce an adequate legal system for a fair and competitive environment in
international business. The inability to agree on business practices for this global environment
leaves the United States to exercise extraterritorial laws in uneven manners, ultimately affecting
U.S. businesses. These limitations may be a reflection of the differences in culture and ways of
living across the globe despite the demands for economic integration. It cannot be emphasized
enough: a social understanding of the potential benefits of free trade as well as a social
understanding of its current limitations are essential to address those limitations for a mutually
beneficial international community.

Bibliography
BDS National Committee. (n.d.). Introducing the BDS Movement. Retrieved October 23, 2015,
from BDS Movement: http://www.bdsmovement.net/bdsintro
Bernhard, R. C. (1954). Economics. Boston: D.C. Healthy and Company.
Blecker, R. A. (2014). The Mexican and U.S. Economies after Twenty Years of NAFTA.
International Journal of Political Economy, 43(2), 5-26.
Bureau of Industry and Security. (n.d.). Bureau of Industry and Security. Retrieved October 23,
2015, from Office and Antiboycott Complicance:
https://www.bis.doc.gov/index.php/enforcement/oac
DeRight, D. (2013, May 28). JURIST - What Exactly is "Extraterritorial Application" of a
Statute? Retrieved October 9, 2015, from JURIST:
http://jurist.org/forum/2013/05/kenneth-gallant-extraterritorial-application.php
Dogde, W. S. (1998). Understanding the Presumption Against Extraterritoriality. Berkeley
Journal of International Law, 16(1), pp. 85-125. Retrieved October 9, 2015, from
http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1170&context=bjil
Eastwood, S., & Quinnen, H. (2011, June). Differences between the UK Bribery Act and the US
Foreign Corrupt Practices Act. Retrieved October 13, 2015, from Norton Rose Fulbright:
http://www.nortonrosefulbright.com/knowledge/publications/52195/differences-betweenthe-uk-bribery-act-and-the-us-foreign-corrupt-practices-act
Galbraith, S. (2007). Anatomy of a Business: What It Is, What It Does, and How It Works.
Westport: Greenwood Press.
Hacking, D. L. (1979). The Increasing Extraterritorial Impact of U.S. Laws: A Cause for Concern
Amongst Friends of America. Northwestern Journal of International Law and Business.

International Law - HG.org. (n.d.). Retrieved October 9, 2015, from HG.org Legal Resources:
http://www.hg.org/international-law.html
Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2012). International Economics: Theory and
Policy (9th ed.). Addison-Wesley.
Langenfeld, J., & Nieberding, J. (2005, June). The Benefits of Free Trade to U.S. Consumers.
Business Economics, 40(3), 41-45.
Matthews, C. (2012, January 27). The FCPA Bad For Business Argument. The Wall Street
Journal. Retrieved October 13, 2015, from The Wall Street Journal:
http://blogs.wsj.com/corruption-currents/2012/01/27/the-fcpa-bad-for-business-argument/
Mooij, M. d. (2004). Consumer Behavior and Culture: Consequences for Global Marketing and
Advertising. Thousand Oaks: Sage Publications.
Nadel, J. (1987). Cracking the Global Market: How to Do Business Around the Corner, and
Around the World. New York: AMACOM.
Newcomb, R., Sanchez, I. E., Levinson, L. E., & Prevas, T. K. (2014). New US sanctions on
Russias financial, defense and energy sectors impact US companies. Venulex Legal
Summaries, 1-8.
Newcomb, R., Stern, R. E., Levinson, L. E., & deButts, T. M. (2014). Presidents new policy on
Cuba: new opportunities for US business? Venulex Legal Summaries, 1-8.
Office of the United State Trade Representative. (n.d.). Overview of TPP | United States Trade
Representative. Retrieved November 15, 2015, from Office of the United State Trade
Representative: https://ustr.gov/tpp/overview-of-the-TPP
Onkvisit, S., & Shaw, J. J. (1997). International Marketing: Analysis and Strategy (3rd ed.).
Upper Sadle River: Prentice-Hall.

Orrick. (2009). 1778.pdf. Retrieved October 2, 2015, from Orrick:

https://www.orrick.com/Events-and-Publications/Documents/1778.pdf
Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2015). Foundations of Business (4th ed.).
Stamford: Cengage Learning.
Richardson, M., & Evans, C. (2007). Strategy in Action Applying Ansoff's Matrix. Manager:
British Journal of Administrative Management(59), i-iii.
Ryan, C. (2015, Septtember 3). The China-US battle to rule the world. Finweek, 25-27. Retrieved
November 15, 2015
Turck, N. (1977). The Arab Boycott of Israel. Foreign Affairs, 472-493.
U.S. Department of Justice and U.S. Securities and Exchange Commission. (2012, November).
http://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf.
Retrieved October 13, 2015, from The United States Department of Justice:
http://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf
U.S. Department of the Treasury. (n.d.). Office of Foreign Assets Control- Sanction Programs
and Information. Retrieved October 25, 2015, from U.S. Department of the Treasury:
http://www.treasury.gov/resource-center/sanctions/Pages/default.aspx
Vick, K. (2015, June 5). This Is Why Its Hard to Boycott Israel. Time Magazine. Retrieved
October 23, 2015, from http://time.com/3910835/israel-boycott/
Wagner, D., & Disparte, D. (2012, April 29). Walmart, the FCPA, and America's Ability to
Compete. The Huffington Post. Retrieved October 13, 2015, from The Huffington Post:
http://www.huffingtonpost.com/daniel-wagner/walmart-the-fcpa-andamer_b_1463292.html