Should The US Fear An Impact Of Free Trade Based On The Current Presidential Campaign

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Should the U.S Fear an Impact of Free Trade Based On the Current Presidential

Campaign

Introduction

The signing of free trade deals has attracted heated debate in the U.S. for a long

time. Despite the fact that trade agreements are aimed at removing trade barriers, some

individuals in the U.S feel that trade deals have interfered with the economy, especially

with regards to employments opportunities. Thus, in the recent past, political

personalities led Donald Trump and Bernie Sanders have been in the forefront in

opposing free trade agreements, especially the Northern American Trade Agreement

(NAFTA) and proposed Trans-Pacific Partnership (TPP). According to Trump and

Sanders, the signing of NAFTA and TPP has led to disastrous effects among the

Americans. Nevertheless, some people are of the opinion that the trade agreements are

beneficial to the growth of the U.S economy. Therefore, this essay aims at examining the

impacts of free trade agreements in the U.S. It will critically analyze the opposing

positions on the existence of FTA, especially with regards to its effects on the labor

market. Finally, the paper will give recommendations on the future of free trade in the

U.S.

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Free Trade Agreements

Free trade agreements (FTA) are those business deals that are signed among countries to

reduce economic barriers. Scott (6) note that free trade is intended to reduce tariffs, easier access

to other partner’s markets, protecting local exporters from losing out to foreign firms,

strengthening inter states relations and proposing appropriate measures that can govern imports

among states. Thus, the free trade is beneficial not only to the social- economic welfare of the

country but also to the political prosperity of a nation.

The U.S has been participating actively in the formation of FTA with the neighboring

countries. For instance, in 1994 President Bill Clinton led the Americans to the signing of

NAFTA with the aim of eliminating trade and investment barriers between the U.S., Canada, and

Mexico. The agreement was also supposed to protect local markets and industries, increase trade,

foreign investment, improve income, the standard of living and improve employment

opportunities for the American citizens. Additionally, NAFTA stipulating rules that would

govern procurements, intellectual property rights and competition.

Trans-Pacific Partnership (TPP) is another trade agreement that has raised heated debates

in the U.S since was signed on 4 February 2016. The agreement that was signed in New Zealand

involved the U.S, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, Canada, Chile, and

Peru. The FTA aims at promoting economic growth, creation and retention of jobs, enhancing

productivity, reducing poverty, promoting good governance and strengthening environmental

protection strategies.

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The Effects of FTA in the U.S

The Impact of FTA on the Employments in the U.S

The creation of jobs has been a central element in the formation of every FTA that

the U.S has been a party to. For example, during the signing of NAFTA in 1994,

President Clinton promised that the agreements will create a lot of jobs for the Americans

(Murphy 403). Additionally, the signing of TPP under President Obama regime is

expected to create a lot of employment for the citizens of the member countries (Ciuriak

& Ciuriak (23). However, in the current U.S presidential campaigns, some politicians

have raised several issues on how the FTA has failed to create jobs for the Americans as

expected. Although some individuals believe that trade agreements such as FTA have

created jobs, other citizens led by Trump and Sanders argue that trade agreements have

resulted in the loss of employment opportunities. Thus, the trade agreements have drawn

protests in the U.S; especially from those who fear that trade deals have a co-relation with

job loss.

The opponents of FTA argue that despite the fact that trade agreements were

supposed to generate new jobs, such agreements have produced disappointing results.

That is, FTA has led to the reduction of the workforce in the U.S. Scott (10) indicate that

the rise of trade deficit between the U.S and Mexico resulted in the displacement of

682,900 jobs between 1994 and 2010 of which 61% of net job losses affected the high-

paying manufacturing sector, particularly those that were located in California, New

York, Michigan and Texas whereby most industries moved their plants to Mexico.

Villareal & Fergusson (14) indicate that by 2014, the U.S. had lost one million

jobs since the signing of NAFTA. Burfisher et al. (128) found out that NAFTA caused

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the loss of some 700,000 jobs as production moved to Mexico. Most of the losses came in

California, Texas, Michigan and other states where manufacturing firms are concentrated.

According to Cooper (425), NAFTA strengthened the ability of the U.S. employees to force

workers to accept lower wages and benefits. Villareal & Fergusson (11) argue that globalization

of trade that is enhanced by trade agreements will shift manufacturing jobs out of the U.S to

lower wage countries.

Burfisher et al. (128) indicate that trade and investment trends have contributed to

middle-class pay cuts that have led to the growing income inequality among the citizens.

Cooper (425) claim that post-NAFTA trade and investment policies have resulted in the loss of

American manufacturing jobs because the U.S firms relocated to Mexico to take advantage of

the country’s lower wages and weaker environment standards. Thus, the relocation of companies

from the U.S is blamed to have rendered some citizens jobless and providing employment to

nationals in other countries.

Hufbauer (50) indicate that NAFTA contributed to the decrease of U.S. wages. Thus, the

reduction of wages has been connected with the increasing income inequality in the U.S, Canada,

and Mexico. According to Gaskin & Richard (715), two of every three displaced workers who

were rehired in 2012 experienced wage reductions. Furthermore, the post-NAFTA era has seen

the rise of low skill jobs in some sectors such as hospitality industry because of the competition

of labor force, especially after the signing of NAFTA. Hufbauer (54) found out that some hotel

managers prefer to employ illegal immigrants because they can work at low wages compared to

the U.S citizens. As a result, the employment of foreign nationals has in some cases

compromised quality since some employment criteria may not be put under consideration.

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Villareal & Fergusson (14) indicate that job losses are among the causes of the

increase of the illegal immigrants in the U.S. According to Burfisher et al. (128), since

the signing of NAFTA, an estimate of 300,000 families in Mexico has been displaced

from their workplaces. This scenario that has compelled some Mexican to seek for better

employment opportunities in the U.S. For example, in 1993, an estimate of 3.9 million

illegal migrants was reported in the country. Hence, the opponents of the current

immigration situation in the U.S argue that the signing of the NAFTA is the causality

behind the mass movement of Mexicans to the country since the agreement provided a

leeway for free border movements. This statement logically implies that the abolition of

FTA can give a long lasting solution to the issue of illegal immigrants.

Positive Impacts of the Trade Agreements

Most studies indicate that the formation of FTA has positive results that can stir

development of a country. For instance, Harrison & Mc Millan (858) indicates that FTA

has helped in the reduction of trade barriers among member countries. That is, NAFTA

has been helpful in removing trade barriers between Mexico, Canada, and the U.S, hence

leading to free movements of goods and services; a scenario that has enhanced trading

activities in the area and created self-employments opportunities among the resident of

the U.S.

The free flow of trade has reduced consumer exploitation due to the reduction of

the monopolization of trading commodities. It has also enabled more goods and services

to reach the consumers at lower prices, hence increasing their standard of living in the

country. For instance, the post-NAFTA policies allowed the U.S. to import oil from

Mexico and Canada that was worth $144.2 billion in 2007. The importation of oil was

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supported by the elimination of oil tariffs that were arrived at during the signing of NAFTA. The

reduction of import duties has also led to the reduction of prices of primary commodities such as

vegetables, fruits, meat et cetera. Therefore, the views of Trump and Sanders are extreme and

impartial, and if they are adopted they are likely to increase consumer exploitation in the U.S.

Scott (8) argues that NAFTA has led to the expansion of the trading area. The NAFTA

has created a free trade bloc with 360 million consumers and a gross domestic product (GDP) of

$6.5 trillion Harrison & Mc Millan (859). Thus, NAFTA has increased the market for the

American, Canadian and Mexican goods and services. Hence, the abolishing of the trading bloc

will affect the economy of the individuals, organizations and the countries involved.

Villareal & Fergusson (14) show that industries in the NAFTA countries have managed

to export more goods to their neighbors without facing stiff protectionist’s tariffs that

discouraged traders before the signing of NAFTA. Hence, if the American government accepts

the anti-FTA ideologies, then the GDP of the U.S will experience a decline since there will be a

limited scope of business operation, limited sales in organizations and reduced investors in a free

trade area.

Harrison & Mc Millan (859) argue that Free trade policies have created a level of

competition in the modern open market that produces more innovation, improved products,

better-paying jobs, new markets, increased saving, and investment. It has also aided in spreading

values of freedom (globalization of trade enhances consumer’s choices because when goods

come from outside customers have more options of brands, styles, and varieties).

Trade agreements have also been found to be beneficial to the consumers. Many of the

products that are produced in the U.S are cheaper and better due to their imported components

and raw materials that improve their quality and lower their cost. Hence, trade agreements boost

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the competitiveness of products and allow producers to sell more abroad and employ

more workers in the U.S (Ciuriak & Ciuriak 23).

Harrison & Mc Millan (859) claims that free trade can also lead to a healthy

competition in the production of goods and services. That is, when the consumers are

exposed to the many sellers (from outside and inside the country), dealers and

manufacturers are likely to worker harder so as to entice their clients. Otherwise, they

may opt for alternative suppliers. Hence, the proponents of FTA are of the opinion that

the trade deals can ensure quality and effectiveness in the production of goods and

services.

Critical Examination of the Conflicting Debates on FTA

Critically speaking, the available information on the benefits of FTA on local and

international development is a clear sign that nations can reap more from trade deals if

they are well utilized. From the above arguments, it is clear that FTA can lead reduction

of trade barriers, increase the GDP and income per capita, create employments, promote

values of good governance and democracy, ensure environmental conservation and

promote environmental conservation measures. Thus, it is fallacious to conclude that

FTAs should be abolished because of their impact on the labor market. That is, apart

from concentrating on some adverse consequences of NAFTA and TPP, there is a need

for the Americans to have a wider picture of both the positive and negative effects of

FTA on the U.S economy.

Secondly, the claims that the signing of NAFTA is responsible for the estimate of

682,000 U.S jobs may not be necessarily true because other factors were at play during

the said period that can be attributed to the job loss. For example, since the U.S Labor

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Statistics indicate that 116,400 job losses occurred in 2007, it is logical to hold that NAFTA was

not the sole cause of the loss of employment in the country during 1994-2010. In fact, other

factors such as global recession, especially in the year 2007 might have contributed to the job

loss since most dismissal, and retrenchment cases were reported during that time. Hence, there is

sufficient evidence that the financial recession of 2007 is a key contributor to the job loss in the

U.S since most studies have described it as the worst crisis since the 1930 great depression.

The assertion that unemployment in the U.S has resulted from the signing of FTA is also

difficult to ascertain since it is hard to differentiate the unemployment cases that are caused by

FTAs and those that that are brought about by other factors such recession, lack of certain

employment criteria, lack of enough job opportunities for others. Thus, the reports on the impact

of FTA on employments can be termed inconclusive and contradictory. Whereas Scott (10)

indicate that NAFTA is the cause of the displacement of 682,900 employees, Ciuriak & Ciuriak

(25) shows that the employment cases in the U.S increased over the period of 1993-2007 from

110.8 million to 137.6 million. In this context, this essay concludes that it is emotional to call for

the abolition of a system that has witnessed more employments cases than deployments.

Another criticism that is directed to those who are opposing FTA regards the conception of

development and welfare. The opponents of FTA are not justified to posit that trade deals should

be done away with because they have led to the reduction of job opportunities. This is because

development has a wider connotation than employment; hence, development should be viewed

from a multidimensional perspective. The logical implication of this assertion is that the critics

of FTA ought to consider the cases of employments that have resulted from NAFTA instead of

concentrating on the issues of deployments that might have been caused by financial,

organizational constraint. It should be noted that the relocation of some firms from the U. S to

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Mexico resulted from corporate threats but not from the existence of NAFTA. In any case trade

agreements were there even before the 2007-2008 global recession.

Moreover, the act of viewing trade deals from narrow perspectives of

unemployment is likely to interfere with the development achievements that the U.S,

Mexico, and Canada have achieved since the formation the NAFTA. Notably, the

opponents of FTA should consider how NAFTA has improved the international relations

of the parties, the extent to which it has helped in regional environmental conservation,

the role it has played in promotion of good governance and democracy and its effect on

the growth of the economy instead of pinning FTAs down on the basis job loss.

The Future of Free Trade in the U.S

The future of Free trade in the U.S can be determined by the citizens of the U.S.

That is if the citizens agree that it should be abolished then trade deals such as NAFTA

and TPP will be nonexistent. Nevertheless, the abolition of such organization can cost

the nation in several ways. Firstly, it may increase poverty among the population since

prices of commodities will increase due to high import taxes, hence straining the budget

of ordinary citizens. Lack of free trade will also lead to the decline of the national

economy since there will be a reduction of investors and entrepreneurs in the U.S. The

removal of trade will increase consumer exploitation since sellers will have the monopoly

of production that is normally reduced due to competition that is enhanced by free trade

environment.

The elimination of free trade will also affect the international relations between

the U.S and her neighbors. It will impact on political, social and economic interactions

that can hinder cooperation among states. Removal of free trade can also slow down the

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rate of innovation since international interaction (that is enhanced by free trade) enables ideas

and technology to diffuse faster from one nation to another. Hence, to avoid these challenges that

can result from the removal of free trade, there is a need for handling the issue of FTA with a lot

of sobriety so as to mitigate the challenges that can be associated with its removal. Notably, this

paper recommends that the policies that govern free trade should be amended so as to reduce the

challenges that are connected with free trade in the U.S. But if the FTAs are eliminated then, the

U.S citizens may create problems in the process of looking for solutions.

Is the U.S Heading for Isolationism?

The answer to this question is conditional. That is, if FTA is eliminated then the U.S will

automatically subscribe to isolationism; a policy that tries to isolate a country from the affairs of

other nations by denying it an opportunity of entering into alliance and international

commitments (Nye 45). In contrast, if the FTA is not eliminated, then the U.S will not head to

isolationism. But since, isolationism strategies may have more disadvantages than advantages;

there is a need for Trump and other proponents of isolationism to propose alternative policies

that can aid in the reduction of refugees and illegal immigrants. Alternative policies can also

assist in the increase of employment opportunities, reduction of poverty and minimization of

crimes in the U.S.

The introduction of isolationism policies will contradict the international goals that

prioritize international cooperation as one of the targets of achieving global development. The

isolationism policies will also undermine the progress that the U.S has reached in history.

Moreover, isolationist policies may not manage to curb the U.S challenges fully since the

development of technology has reduced the confines of space and time. That is, some of the

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crimes that are committed in the U.S due to unemployment are done by people who are

not physically present in the country.

Isolationism policies may not have a significant result in the labor market because

FTA does not entirely cause the challenges that are brought by unemployment. Ciuriak &

Ciuriak (25) found that unemployment in the U.S is caused by multiple factors such as

recession, lack of qualification to handle some policies, government regulations, etc.

Hence, one cannot ascertain that the major cause of unemployment is FTA.

Conclusion

To sum it up, the essay has found out that it is fallacious to argue that FTA should

be abolished in U.S because of their negative the impact of FTA on the labor market.

The essay has also urged that apart from concentering on the adverse impacts of the FTA

on the job market, the Americans should assess the benefits of NAFTA and TPP before

concluding whether the trade deals should be abolished or not. Hence, this paper has

advised the Americans to scrutinize FTA policies with the aim of proposing amendments

in areas that seem to provide a loophole for negative consequences instead of

condemning the FTA in totality.

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Works cited

Burfisher, Mary E., Sherman Robinson, and Karen Thierfelder. "The impact of NAFTA on the

United States." The Journal of Economic Perspectives15.1 (2001): 125-144.

Ciuriak, Dan, and Natassia Ciuriak. "Regulatory Coherence and the Trans-Pacific

Partnership." Available at SSRN 2727524 (2016).

Claessens, Stijn, and Mr M. Ayhan Kose. Financial Crises Explanations, Types, and

Implications. No. 13-28. International Monetary Fund, 2013.

Cooper, William H. "Free Trade Agreements: Impact On Us Trade and Implications For Us

Trade Policy*." Current Politics and Economics of the United States, Canada and

Mexico 16.3 (2014): 425.

Gaskin, Darrell J., and Patrick Richard. "The economic costs of pain in the United States." The

Journal of Pain 13.8 (2012): 715-724.

Harrison, Ann, and Margaret McMillan. "Offshoring jobs? Multinationals and US manufacturing

employment." Review of Economics and Statistics 93.3 (2011): 857-875.

Hufbauer, Gary Clyde. NAFTA revisited: Achievements and challenges. Peterson Institute, 2005.

Murphy, Betty Southard. "NAFTA's North American Agreemnet on Labor Cooperation: The

Present and the Future." Conn. J. Int'l L. 10 (1994): 403.

Nye, Joseph S. "The Myth of Isolationist America." Project Syndicate, February 24 (2014).

Scott, Robert E. "Heading South: US-Mexico trade and job displacement after

NAFTA." Economic Policy Institute Briefing Paper 308 (2011).

Villareal, M., and Ian F. Fergusson. "NAFTA at 20: Overview and trade effects." (2014).

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Should the US Fear an Impact of Free Trade Based On the Current Presidential Campaign

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