Specialization
Specialization is a production method where an entity strives to achieve a high degree of efficiency by producing a limited supply scope. For example, countries often specialize in producing goods and services indigenous in the part of the world where they are located (Evans et al., 2006). Such countries trade goods for other goods and services. Specialization is a critical component of a successful Regional Trade Agreements.
Regional Trading Agreements are the treaties signed between two or more countries that permit the movement of goods freely across the member countries (Omilola, 2011). In this case, specialization must be a key component since every nation will only be required to export what best they can produce (Haveman, and Hummels, 2004). Specialization aims to ensure that no particular nation is engaged in producing goods and services that other countries are producing. The primary cause of trade wars that is commonly experienced between countries is due to the competition in the production of similar goods and services (Manger, 2010). The Trading Agreements access a country and assign the nation to produce and export their indigenous gods and services. Specialization thus encourages production discipline for the member countries since no country can act contrary to the specialization agreements.
Generally, specialization is a vital component of the Trading Agreements since it ensures that member nations can only produce their indigenous products and services. In the process, they are also only allowed to export such products across the member countries’ borders. Specialization can hence resolve conflicts that can arise to the production and export of similar products by countries. Therefore, Regional Trade Agreements should strictly integrate specialization in the agreements to avoid the risk of trade wars when nations are producing and exporting the same goods and services.