Pros & Cons of Free Trade With Other Nations
As the world seemingly continues to grow smaller through globalization, more and more countries are entering into economic alliances based upon the principles of free trade. According to Business Dictionary.com, a free trade agreement is a "treaty ... between two or more countries to establish a free trade area where commerce in goods and services can be conducted across their common borders, without tariffs or hindrances..." The North American Free Trade Agreement is one such pact to which the United States is a party.
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History
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Although human beings have conducted trade for thousands of years, the concept of so-called free trade is relatively new. In 1776, Adam Smith, a Scottish economics philosopher, wrote and published the first known thesis on free-market economics, "The Wealth of Nations." In 1947, a conference in Geneva produced the General Agreement on Tariffs And Trade, which in 1993 came under the enforcement of the World Trade Organization. The European Economic Community morphed into the European Union that year, and the United States became a NAFTA participant on Jan. 1, 1994.
Theories/Speculation
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Proponents of free trade believe that the creation of economic free-trade agreements and open markets increases competition and innovation, leads to lower priced products and new markets, creates better-paying jobs and steers consumers toward higher savings while promoting more investment in the business community. Not everyone agrees, however, that free trade brings about these effects, and it is often a topic of heated debate.
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Pros
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According to the U.S. State Department, the United States had implemented nine free trade agreements with a total of 14 countries and had several others awaiting final enactment as of September 2009. The agency reports that since the implementation of these economic pacts U.S. exports have increased exponentially and imports have grown considerably. Therefore, the State Department makes the claim that free trade supports economic development in poor countries as well as in the United States.
Cons
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In November 2003 the Economic Policy Institute issued a report that seriously questions the benefits of free trade. According to the document, the rise in the U.S. trade deficit with its NAFTA trading partners, Canada and Mexico, caused the displacement of high-wage positions in U.S.-based manufacturing industries. Additionally, the report states that workers in all three member countries have been hurt by free trade, with many Mexicans being reduced to subsistence-level work while Canadians witness a reduction in important public spending in education, health care and other such services. The institute says that NAFTA guidelines tilt the economic situation in favor of investors while offering no environmental or worker-safety protection.
Considerations
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While just about everyone agrees that international trade will continue, the debate over free-trade economics demonstrates the existence of two radically disparate viewpoints; those of the businesses and investors that have benefited from the adaptation of free-trade agreements and those of blue-collar workers, who appear to be losing ground financially. Policy negotiators might do well to consider the well- being of all concerned by adopting guidelines that guarantee a living wage to all as well as environmental and worker-safety standards.
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