Is Free Trade Good for the United States of America? Essay

Since 1790 trade has had major benefits to the United States and contributed to economic growth in the country. American workers participate in producing exports while foreign workers produce imports. America's free trade agreements have facilitated economic growth and resulted in major benefits to the different industries. Despite the benefits associated with free trade, President Donald Trump has increased tariffs on goods worth billions of dollars, imported from the EU, Canada, and Mexico as well as China. These nations form the world’s largest economies and this kind of incremental increase in prices acts as a barrier to trade operations. President Trump has initiated a trade war because he believes the US is losing billions of dollars in trade. According to President Trump, “trade wars are good, and easy to win”. He claims that the dollars acquired from the imposed tariffs will aid in the development of the US’s agricultural sector. Although free trade has caused America to rely upon other nations and led to temporary job loss; ultimately free trade is more favorable to America. Free trade incites technological advances thus creating higher-end jobs, allows consumers to select from a wider variety of goods with lower prices, and promotes lasting peace amongst nations. If President Trump’s trade war continues, Americans could expect to pay higher for goods and access to overseas products.

From 1790 until 1914, tariffs were the first source of revenue for the US federal government. As America’s industries progressed trade became one of the divisive issues in United States politics. The reason behind the divisive trade in America was based on the fact that some of the states supported the slave trade while others did not. The northern manufacturers in the state wanted the protection of high tariffs on competing imports while those in the South involved in cotton production supported an open trade policy that would promote their ability to export. After decades, there was a general trend that was focused on having higher tariffs that would protect the northern states involved in manufacturing which eventually led to the Smoot-Hawley Tariff Act in 1930 (Destler, 2016). During President Franklin Roosevelt's era, his Secretary of State, Cordell Hull, who was involved in the wool free trading operations was determined to ensure that he could achieve the interests of his state Tennessee. Hull was determined to reverse the high tariffs by proposing the Reciprocal Trade Agreement Act. Congress approved the trade agreement which then set the tone for U.S. future trade agreements.

Like every other nation, America has a focus on protecting the local industries through high tariffs imposed on imports. Free trade is facilitated through trade agreements such as the General Agreement on Tariffs and Trade (GATT), The North American Free Trade Agreement (NAFTA), and the World Trade Organization (WTO). After the Second World War, there was a need to build a post-war economy. The United States was at the forefront of creating (GATT) with the goal of preventing the expansion of communism (GATT); which reduced the trade barriers among nations (Bhagwati, 2017). Based on the benefits acquired from this agreement, America prioritized free trade agreements as it had a positive impact on its economy. In 1994, there was the creation of the World Trade Organization (WTO), which regulates global trade. After this period, America focused on bilateral accords that would encourage trade between nations. The United States created many trade agreements with individual countries with the aim of improving its economic development. America wanted to benefit from other nations through outsourcing and dumping strategies where it was easy to acquire skills from other countries and have a large market for its products. Involvement in the FTAs was one of the strategies that the United States used to strengthen its economy and become one of the superpowers in the world.

In the current highly globalized economy, the use of technology has become a requirement for success. Through free trade, America can incite the use of highly advanced technology that facilitates the growth of different sectors, and create high-end jobs (Anderson & Yotov, 2016). Some argue that America loses jobs due to free trade, including President Trump. On December 20, 2012, Trump tweeted, “China is robbing us blind in trade deficits and stealing our jobs, yet our leaders are claiming ‘progress’”. However, much data shows that low-skill jobs are replaced by technology and not foreign workers. According to the research paper from Ball State University titled, ‘The Myth and the Reality of Manufacturing in America’, “trade accounted for 13% of the lost U.S. factory jobs, but 88% of the jobs were taken by robots and other factors at home”. In other words, due to the increase in technology factories are in need of fewer employees. Technology use in various industries has led to improved production, quality, and accuracy in manufacturing products and services. Ball State University reported, “With increasing automation, the manufacturing industry is becoming more productive. From 1998 to 2012, all sectors experienced a productivity growth of 32% when adjusted for inflation – the production of computer and electronic products rose 829% (Hicks & Devaraj 2017)”. Technology has led to the creation of highly ranked positions in organizations that facilitate high-quality production of products and services. Through free trade, America can easily access and adopt advanced technology which then facilitates the creation of high-end jobs in corporations.

Free trade is vital as it improves both efficiency and innovations in different sectors. In the case of technology, people have an opportunity of interacting with advanced technology which enables them to use creativity and innovative skills to create new developments. Job satisfaction is also created among the high-end employees who have to keep on adjusting their skills based on the current and emerging trends in the market. Not only has technology facilitated the creation of high-end jobs but many others that require the utilization of skills by other levels of employees (Dewan & Ronconi, 2018). According to England and Wales census records, “[There has been a] 909% rise in nursing auxiliaries and assistants over the last two decades. Analysis of the UK Labour Force Survey from the Office for National Statistics suggests the number of these workers soared from 29,743 to 300,201 between 1992 and 2014” (Allen, 2015). Additionally, there was a 79% drop in weavers and knitters from 24,009 to 4,961. Ultimately, technology is getting rid of laborious jobs and creating more caring jobs. Despite claims that technology has led to temporary job losses, it has also facilitated the creation of more and high-end jobs in the American economy.

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Free trade allows consumers to have access to a wider variety of goods such as overseas produce and clothing for lower prices. America allows the free flow of products and services from other nations. As a result, the United States imports a large variety of products and services into the country which then enables consumers to fulfill their tastes and preference (Baier, Yotov & Zylkin, 2019). This expansion of trade was an effect of the Great Depression. During the Great Depression, a lack of access to products and services led to people suffering from economic pressures. After the Great Depression, America found it necessary to have changes in its trade policies as this was the only way to encourage international cooperation that promotes global trade and economic development (Ludwig & Wang, 2018). For instance, NAFTA changed the way Americans eat by introducing avocados into our diets in 1994. Before NAFTA Americans only had access to avocados and other produce during specific seasons; instead of all year long. Quartz avocado expert David Yanofsky reports, “Avocado consumption in the United States has exploded going from one pound per person to seven, over the course of 20 years (Yi 2017)”. Now that Mexican avocados and products have become a part of our diets, President Trump’s tariffs on Mexico will have a negative impact on consumers. In a Bloomberg article written by Michael Hirtzer, “Avocados crossing from Mexico into Texas were fetching more than $60 per 25 pound-carton, up from about $42 a week ago and $38 a year ago, according to U.S. Department of Agriculture data”. The increase in prices in avocados is due to an increase in tariffs. Furthermore, Larry Kudlow, an economic advisor of the White House calculated that, “American consumers can expect to pay the price as U.S. businesses pass on increased costs. The U.S. imported $346.5 billion worth of goods from Mexico in 2018, according to government data, meaning a 5% tariff will cost over $17 billion (Adamczyk, 2019)”. In other words, the 5% tariffs will make products more expensive for consumers costing them a total of $17 billion. Additionally, shoes manufactured in Mexico were cheaper due to NAFTA and the cheaper labor in Mexico. Prior to this trade agreement shoes were more expensive being that labor was more expensive in the U.S.; the following will apply after the 5% tariffs on Mexican imports. Conclusively, free trade is the reason Americans have access to a large variety of goods.

Furthermore, free trade creates competition that promotes customer satisfaction and sovereignty; every corporation has to ensure that it provides the best quality in the market. Since companies operating in similar industries compete for the same consumers, there is a need to deliver what the customers expect to remain competitive in the market. The wide variety of products has also facilitated their acquisition at lower prices as corporations compete for customers. This concept is evident in the American auto industry, over the past thirty years the U.S. auto industry has had a decrease in sales as a result of struggling to compete with foreign competitors, such as the Japanese auto industry. In 1958, the U.S. imported Japanese Toyota and Datsuns cars which were more affordable and saved gas. According to journalist Marc Davis, “American firms Ford, GM, and Chrysler responded by manufacturing new lines of smaller, more fuel-efficient cars”. The American auto industry responded this way in order to compete with the foreign exports which ultimately benefits the consumers. Free trade benefited consumers because it gave them access to more fuel-efficient and affordable American cars.

As French philosopher Baron de Montesquieu states, “peace is the natural effect of trade.” In other words, free trade promotes lasting peace among nations as there is a collaboration of effort which requires countries to be interdependent. According to Professor Solomon Polachek’s 1980 research paper, “a doubling of trade on average leads to a 20% diminution of belligerence (Hahn 2016)”. The reason for this is that nations who are united through a trade agreement not only profit from each other but begin to depend on one another for survival. Therefore, the likelihood of either party inciting a war on one another decreases. This is exemplified in the relationship between the U.S. and Germany post World War I and II. At the end of WWI, the U.S. and its allies isolated Germany economically through the Treaty of Versailles. As a result, Germany’s economy failed and there was a rise of a fascist regime, ultimately causing the start of WWII. After the end of WWII America learned from its mistakes and created the Marshall Plan, with the goal of rebuilding Germany and its economy. Today, the U.S. has strong economic ties with Germany and is one of our most trusted allies. Former President Barack Obama celebrated this relationship in his speech at the Messe Trade Show in Hannover, Germany stating, “Germany has long been one of our top trading partners, and during my time in office, we’ve boosted U.S. exports to Germany, and we’ve increased our bilateral trade by nearly 40%”. Free trade enables America to create important relationships that determine the future of its economy. This kind of peace is also experienced by American citizens who feel secure as there exist no threats from foreign nations. As proved free trade creates friendship and other vital relationships between America and other states.

In spite of the numerous benefits free trade has, critics such as President Trump claims that free trade is not beneficial to the U.S. as it causes us to lose money due to unfair trade and threatens domestic jobs. On March 3, 2018, Trump tweeted, “... Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!”. Trump believes that American jobs are either at risk or are already being outsourced to countries such as India. He concludes that if America does not protect its jobs and industries from foreign competition, our economic power will decline. This idea originates from the lump of labor theory which states that there is a fixed lump of labor within an economy and that once those jobs are distributed, there are no other jobs. Still, many economists have disproved this concept. In the book ‘The World is Flat’ author Thomas Friedman states: “The main reason the lump of labor theory is wrong is that it is based on the assumption that everything that is going to be invented has been invented, and that therefore economic competition is a zero-sum game, a fight over a fixed lump. This assumption misses the fact that although jobs are often lost in bulk… new jobs are also being created…Friedman perfectly explained that if this theory was true, the U.S. unemployment rate will be ‘much higher today than 5%. Additionally, many of the jobs that are being outsourced are jobs that would no longer exist in a few years due to technological advances. Furthermore, the U.S. has earned millions of dollars as a result of NAFTA, despite Trump’s claims. Trump believes NAFTA is an unfair agreement because, according to the United Nations Comtrade database on international trade, America imports $349 billion from Mexico while Mexico only imports $216 billion from the U.S. Our president uses the argument that Mexico is not buying as many goods from the U.S. as we buy from them. Although this is true, President Trump is not taking into account the two countries’ different GDPs. Mexico does not have as much money to spend on imports like America. Even though Mexico only imports $216 billion from the U.S., it accounts for 47% of Mexico’s overall imports. Meaning that the U.S. is Mexico’s main supplier; this would have not been possible without a free trade agreement. While the total U.S. imports from Mexico are significantly larger, it still only accounts for about 14% of all U.S. imports. This is also evident in the trade partnership between the U.S. and Canada, with the U.S. being Canada’s main supplier. Canada imports $235 billion from the U.S. as opposed to the U.S. import of $326 billion from Canada. Again, we see that America’s total imports are greater than Canada’s, but their imports from Canada only represent 13% of America’s overall imports. On the contrary, Canada’s imports from America account for 52% of its overall imports. This proves that America is benefiting more from NAFTA in comparison to Mexico and Canada. Withal, free trade brings in more money to the American economy compared to minor losses.

In conclusion, free trade has more benefits to the American economy when compared to drawbacks. Through globalization, the world has become one and nations have joined hands to grow their economies. Technology has facilitated global trade in a significant way. Free trade allows the United States to have access to advanced technology which when implemented in organizations leads to the creation of high-end jobs. This means that the claim on technology reducing employment opportunities does not always apply. On the other hand, free trade has facilitated an easy flow of goods and services from one nation to the other which enables customers to have access to a wide variety of products and services. With free trade, there is the creation of lasting relationships between America and other nations which creates a suitable environment for economic growth and political stability. Based on the advantages associated with free trade, America should focus on having more agreements that will make it possible to access products from various parts of the world that will then lead to customer satisfaction. Free trade has more benefits to America when compared to drawbacks a reason why the government should focus on supporting global trade while protecting the local industries.