Question

After reading the article entitled "Heading South," available in the Resources section, what are some of the unintended consequences of free trade agreements like NAFTA? Are free trade agreements a good idea, or do they put American jobs at risk?

Answer 1

In 1994, the U.S, Mexico & Canada executed the NAFTA, one of the first & largest free trade pacts in the world. The 3 countries all agreed to lessen tariffs & other hurdles. More than 20 years later, supporters & opponents of free trade are still discussing free trade pros & cons of free trade pacts like NAFTA.

Pro- Economic Efficacy

The big argument to support free trade is its capability to escalate economic efficacy. According to fundamental economic theory, free trade strategies imply that each nation concentrates on its comparative advantage, lowering the price of commodities & making everybody better off. If the U.S is really good at producing cars & China at producing televisions, free trade rules should imply that each nation plays to its strengths rather than wasting effort doing lesser efficient tasks.

Con- Job Losses

Economic efficacy might be advantageous for the economy as a whole in the long-term, but that does not help much the factory labour who loses his job in the short run. Free trade makes a country's general economy more productive, but it also can compel millions to change careers. NAFTA, for instance, may have destroyed approximately one million jobs in the U.S. When talking about the pros & cons of protectionism, the system of heavily taxing imports as a way to maintain domestic industries, the issue of employment loss is an essential point always.

Pro- Less Corruption

Hurdles to trade create lots of prospects for political corruption, as per some supporters of free trade. Influential interest groups can convince authorities to provide them special protections such as tariffs / subsidies. That may provide established wealthy businesses big advantages over upcoming entrepreneurs. Free trade supporters state eliminating trade hurdles creates a level playing ground for everybody.

Con- Free Trade Is not Fair

Trade hurdles might create prospects for corruption, but so do free trade pacts. Economists may envision a community where trade hurdles vanish completely, but free trade pacts are negotiated & sanctioned by politicians with their own interests in mind. As an outcome, the agreements normally are immense documents with loopholes & regulations that create big benefits for established firms. Economic experts have noticed that whilst NAFTA supporters said the pact would deregulate commerce in Northern America, in several cases it just replaced prevailing regulations with new ones which favoured the largest corporations.

Pro- Lessened probability of War

A strong benefit is that free trade lessens conflict by encouraging economies to rely upon each other for foodstuffs & services. Few economists have claimed that this interdependence makes wars much less probable, as no country would want to risk foregoing the access to the other country’s markets.

Con- Labour force & Environmental Abuses

Critics of free trade usually claim that it encourages firms to move to nations with poor environmental & labour laws. Such moves could possibly lead to systematic workforce abuses & environmental destruction. For instance, a coal mining firm in the U.S might have to pay employees a high minimum pay, adopt aggressive safety rules & protect local water bodies from pollution. Free trade pacts might permit the mining firm to move operations to a nation without any of those regulations, enabling it to reduce costs by endangering laborers & the environment.