Assertion from 2003. The top export categories include
Assertion 1: Free trade policies foster economic development in developing
The US is the
leader in maintaining stability, endorsing democracy and the rule of law,
reducing trade barriers and founding a transnational financial system. Free
trade policies introduce many social benefits leading to economic benefits (Froning, 2000).
2. The Chile-US economic relationship remains strong,
partly through the long standing United States Chile FTA (2004), trading is
classed as ‘essential’ to endure challenging growth conditions. Free trade allows a flow of
products, services and people between the countries (Muñoz, 2017).
The US is the
second largest market for Chilean products, maintaining a positive trade
balance as 100% of US goods exported to Chile are now duty free. Chile was the
United States 23rd largest goods export market in 2016, whilst US
good exports to Chile were $12.9 billion, 377% up from 2003. The top export
categories include mineral fuels and aircraft (“Chile”, 2016).
Assertion 2: Free
Trade Policies promote innovation.
It makes economic logic to purchase merchandise
from countries who may specify in a particular industry or produce cheaper. Trade
revolves around gaining a greater variety and offering improved opportunities, advancing
standard of living by introducing better products, urging companies to innovate,
keeping low prices and high quality in order to increase market share.
Innovation can be produced through
competition and technology. The link of domestic firms to international markets
strengthens companies to compete against sophisticated global competitors,
which is a strong driver of innovation and productivity growth. Data from the
OECD Innovation Microdata Project shows that this occurs due to the increase of
technologies through borders, further augmenting competitive pressures and innovative
markets, firms involved in trade are more productive and innovative than merely
domestic firms. For example, a study of Canadian exporters found that they use
technology more intensively and have higher rates of innovation than
non-exporters, while Canadian importers were 7.6% more likely than non-importers
to adopt new technology (Ezell, 2013).
Assertion 3: Free Trade Policies protect American industries and allow goods to
reach the United States at lower prices.
Free Trade introduces companies to high quality, low priced products.
Imports from countries such as China and Mexico are cheaper and ease inflationary
pressure in the US. Prices are held down by more than 2% for every 1% share in
the market by imports from countries such as China, which leaves more income
for Americans to spend on other products. Free trade introduces more productive
processes, allowing industries to thrive more efficiently, resulting in higher
wages, investments, and a more dynamic economy that continues to create new
jobs and opportunities (Boudreaux & Ghei, 2017).
Contrary Argument 1: Free Trade policies
increase job outsourcing. The removal of trade barriers means that certain
goods may be cheaper to obtain overseas than to make domestically, therefore
job losses may occur as less competitive industries fail.
– Free trade fosters opportunities for American
businesses, free trade rewards risk-taking by increasing sales, profit margins
and market share. Companies can build on those profits by expanding their
operations, entering new markets and creating better-paying jobs. According to a
US Trade Representative, US exports support over 12 million jobs in America,
and trade-related jobs pay an average of 13% to 16% higher wages than do
non-trade-related jobs. There was a loss of 5.6 million jobs between 2000 and
2010. A study by the Centre for Business and Economic Research at Ball State
University, 85% of these job losses are actually attributable to technology
change – mainly automation (Cocco, 2016). American manufacturing productivity is currently its
highest, international trade and improvements in technology have made greater
Contrary Argument 2: Free Trade leads to loss
of domestic industry.
– Free trade
agreements expose companies to foreign competition with lower costs. Critics of
NAFTA argue it damages US industries because low labour costs in Mexico allowed
Mexican manufacturers to undercut American producers. In 2015, the US imported
around $500 billion in goods and services from China, these imports are gains as
each one is valuable. To acquire these benefits, the USA send their own goods
in exchange. China is currently not playing fair with steel, taxing wealth away
from its citizens in order to send America steel at a lower price than it
should be. Although, America profits from the steel imports and send fewer
resources to china in exchange, making themselves wealthier. When America
imports goods, its mix of jobs changes. However, when US industries shrink
because of imports, American labour and capital are freed up for other industries,
creating productivity. The mix of jobs alters (Powell, 2016).
China also destroyed the UK’s steel industry, the UK lost their competitive
advantage as China was producing cheaper steel.
Contrary Argument 3: Free Trade causes
environmental damage as the increase of corporate farms in developing countries
increased pesticide and energy use, and host countries ignore costly
environmental standards. The World Trade Organisation is criticized for not
allowing barriers to imports based on inadequate standards in countries where
goods are produced. The links between trade and the effects on the environment
are complicated and there is not clear evidence. Recent research has made a
huge statement in saying that free international trade improves the
environment. Changes in the location of production is seemed unimportant,
although the fact that free trade includes increases in the scale of economic
activity, has an adverse impact on environmental quality, the last change in
production techniques, is environmentally beneficial, not harmful. Studies
suggest that for once 1% that freer trade raises per capital income in a
nation, the result is that pollution falls by 1% (Benjamin, 2002).