Why Are Trade Agreements Important?
Trade agreements bring many benefits for economies around the world. Trade agreements can foster economic growth by increasing trade for a nation. Increasingly, nations have signed trade agreements with the United States, improving consumer choice and standard of living for trade partners. Major trade agreements include the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) agreements.
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Trade agreements
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Trade agreements may create jobs. The United States has entered many bi-lateral and multi-lateral trade agreements. The U.S. has bi-lateral agreements with Australia, Bahrain, Chile, Israel, Jordan, Morocco, Peru, Oman, and Singapore, according to Export.gov. The governments of the United States, Canada and Mexico signed in the North American Free Trade Agreement on January 1, 1994. The United States alone had 735 billion dollars in goods trade with NAFTA countries, according to the Office of the United States Trade Representative. Trade in services with NAFTA between exports and imports numbered more than 110 billion dollars in 2008, according to the NAFTA secretariat.
New markets
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Trade liberalization opens new markets between trade partners. Particularly for the US market, free trade agreements spur growth in overseas markets for American-made products. Free trade zones allow exports to grow. With trade barriers, restrictions and tariffs dismantled under free trade agreements, exports and imports could travel freely between the partners. Lowering trade barriers by one-third would boost global economic welfare by as much as 613 billion dollars, according to the Business Roundtable.
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Jobs
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Trade Agreements can create jobs for Americans and help to grow the U.S. economy, according to the Office of the United States Trade Representative. Nearly ten percent of U.S. jobs depend on exports, according to Business Roundtable. Every one billion dollars in exports of manufactured goods creates 15,000 new jobs, according to the website.
Competitiveness
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Free trade agreements increase industry competitiveness and the expansion of U.S. exports. Free trade levels the playing field for trade, allowing for free and pure market competition. Competition from abroad forces domestic producers to keep prices down, benefiting the real value of consumers' paychecks, according to the Cato Institute. Importing raw materials free from tariffs lowers the cost of production for U.S. producers and allows them to remain competitive in global markets.
Foreign investment
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Free trade agreements spawn foreign investment, creating economic growth for US and foreign economies. As markets open for each of the trade partners so does investment opportunities.
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References
- Photo Credit world trade image by Chad McDermott from Fotolia.com life in a port image by Alexey Poklonskiy from Fotolia.com
