Business

Economies are interdependent since the activities of one nation have impacts on the other nations. This has resulted into globalization of economic activities so as to create ease in accessing resources from the world economies (Youngs, 2006). Several countries have united to create common market so that access to resources and marketing of products can be simplified. Nations all over the world have developed regulations to protect their markets from the effects of the international markets. This has raised concerns and countries have formed agreements to regulate, remove or reduce barriers to trade between and among these countries. The formation of these agreements and common markets has created many opportunities to the member countries. Contrary to this, several risks have emerged from the formation of these agreements (Steunenberg, 2008).

NAFTA region represents the North American Free Trade Agreement. The agreement was formed by three countries to increase trade between the member countries. These countries are Mexico, Canada and the United States. These countries have different economic levels. The formation of this agreement increased trade between these countries and good economic performance has been realized as a result. Canada has become the biggest trade partner with the United States (Condon, 2009). Consequently, Mexico has become the second trade partner with the United States due to formation of the agreement. The agreement has operated smoothly since a few countries are involved. All the trade partners have benefited from the agreement through expansion of markets. Mexico and Canada have gained access to important resources required to produce products. The U.S has a wealth of resources required for production and this has been of great help to Mexico and Canada (Wilson  Roberts, 2006).

The European Union is composed of 27 counties which united to establish a common single market economy. The union is located in Europe and is committed to integrating the member countries (Mittag, Maurer  Wessels, 2005). The union has contributed a lot to the world economy. The main objective of the agreement was to establish a single market within the member countries that would ensure freedom of movement of people, goods and services and capital. Common policies have been developed concerning trading activities, fishing, agricultural and regional development activities (Svensson, Sinnott,  Blondel, 2008). A common currency, the Euro, was developed by sixteen countries to be used in trade. Some issues concerning the agreement are formed through negations while others are imposed by the concerned regulatory bodies which have been established (Youngs, 2006).

The opportunities and risks associated with establishing operations in the European Union compared to those in the NAFTA region

The opportunities associated with establishing business operations in the European Union
The European Union has established laws concerning competition (Wilson  Roberts, 2006).  These laws protect the industries from cut-throat competition within the member states. Countries with strong economies are discouraged from out-competing smaller economies. This has increased opportunities for the smaller economies within the union. The union has also set up antidumping laws to protect the interest of its members (Condon, 2009).

Existence of a single market in the European Union has increased the opportunities for the member states to access each others economy. The common currency has made trade easier since the member states have a standard currency to dominate the market. Smaller economies have increased their performance due to the access to other economies which perform better (Kubicek, 2007).

Business protection policies have been established to regulate the operation of activities within the markets of the member states. Intellectual property Rights protection has been established to protect the intellectual properties from theft. Several measures have been established to control the activities of companies within the European Union. Environmental protection has been the main concern of the union and many regulations were set up to avoid destructive business activities. The concern about the environment has increased the opportunities for many industries since most of the companies obtain their resources from the environment (Youngs, 2006).

The opportunities associated with establishing business operations in the NAFTA region.
NAFTA has created an increased capital base for the Mexican economy. The country had low economic savings and this could only be increased through opening trade to allow other countries to participate in trade with Mexico (Servn, Maloney,  Lederman, 2008). The agreement has increased access to the US market by the Mexican companies. The agreement has been able to open up the market of Mexico to the other countries such as Canada. NAFTA agreement has also created greater opportunities to Canada since the US market has become accessible by the partners in the agreement. The formation of NAFTA has increased the export of agricultural and food products by the United States economy to Mexico and Canada by 59 (Condon, 2009).

The risks associated with establishing operations in the European Union
The introduction of the European Union has resulted into closure of several businesses within the region. The Ford industries were forced to close Plosnk branch. Other industries adversely affected by the agreement were General Motors, Poland CKD and Fiat (Steunenberg, 2008). The reduction of import duties has created competition from the industries which are well established leading to great losses. The member countries face the effects of political and social differences. The unity of the different countries into one economy has a great risk. The political and social set up of these countries is different (Springer, 1994). This has resulted into political and social conflicts between the member countries. The use of a common currency also has a great risk to the economies of the partners. The economies of the member countries face the risk of economic downfall if the currency fails. Each country ought to develop its own currency and then an exchange factor to be developed. This will protect the economies of the partners from the effects of member countries poor economic performance (Kubicek, 2007).

The risks associated with establishing operations in the NAFTA region
There are differences in the economic, social and political policies of the countries involved in the agreement. These policies determine how the member counties conduct trade. Member countries must adjust their policies so as to follow the conditions set by the policies of their agreement. NAFTA created great risks in the labor market (Bacon, 2007). The U.S labor sector has raised concern that Mexico has developed some policies which may reduce employment of Americans. Environmental standards established by the agreement may affect many businesses leading to relocation of these companies. Clauses in the agreement may restrict the United States from increasing agreements with other nations since there are many restrictions. There is a great risk of the United States dominating the markets of Mexico and Canada. The economy of the United States is big by far compared to the economies of the two countries. Most of the policies may benefit the U.S since it has large production capacity. The resources of Mexico and Canada are very little compared to those of the U.S. This creates a great risk in the production systems of the two countries. The economies of Mexico and Canada can not satisfy the U.S market. This may lead to excess strain on resources of the two countries in an effort to counter balance the market of the U.S (Servn, Maloney,  Lederman, 2008).

Whether such investments should be primarily resource or market-seeking
The formation of NAFTA agreement ought to be resource-seeking oriented. This is because the Mexican economy is a small percentage compared to the US. The Canadian economy is small. The contribution of Mexico and Canada to the US market is very small. The two countries do not benefit as much from the agreement. The agreement should be focused on seeking resources since Mexico and Canada have low resources compared to the U.S. as the marketing of products can be sought internally or from other counties. The economy of the U.S has a wealth of resources which Mexico and Canada can use the agreement as a source of resources to develop more products and expand the quantity and quality of their products (Bacon, 2007).

European Union has a large number of members and should be market oriented. The countries seek better market conditions for their products. The members of the European Union have established several market regulations to control the activities of the member states. The use of market policies has been the main items of discussion by the leaders of the Union. Resource oriented approach in the European Union cannot succeed due to the diverse economies of the member countries (Mittag, Maurer  Wessels, 2005). Each country has specialized in production of commodities which it has comparative advantage. The resources required in the production of the diversified products are different and not all countries can benefit entirely from the resources of the other country (Steunenberg, 2008).

Conclusion
Trade agreements between and among countries creates benefits to the trading partners. The growth of developing countries has been experienced from the increased market access as a result of trade agreements. The resources of production become easily accessible once the countries form agreements. Countries should develop strategies to enter into agreement with other countries so as to accrue these benefits. Many countries have entered into many agreements so as to establish as many benefits as possible. Markets within the members of trade partners become opened up to international trade and the customers are able to enjoy variety of products. The government also increases the collection of taxes from the increased trade activities. Countries which have engaged in trade agreements have experienced growth in their economic performance.

However, there are several risks involved in opening up the national economies to the international markets. The domestic industries encounter stiff competition from established economies. Countries face many regulations in the production and marketing of their products so as to meet the requirements set up by the trade agreements. The economies of the countries become victims of international economic effects which result from bad trade practices, for example, the global economic melt down of the 2008-2009. The use of a common currency is very risky. Economies of the member countries may fall due to reliance on one currency. Each economy should have its own currency so as to avoid the effects of bad economic practices of the member states.