International Finance and Free Trade in the United States
Free trade is a process in which goods, workforce, and capital flow among countries without any hindrances. Countries like United States have benefited from free trade as it has led to increased competition, which benefits the consumers because they get high quality goods at lower costs. The exporters are able to sell their goods and services to international markets without tariffs. This paper focuses on the benefits and limitations of free trade in United States.
Free trade permits nations like the U.S to specialize in goods that they create better than other nations and trade them in exchange of goods and services from other countries, which are of high quality and lesser cost. Specialization has made the US to be more competitive and innovative. Innovation involves use of new technologies, which allows the US to produce more and get new investment opportunities. Free trade leads to economic growth, which creates better jobs as well as improved standards of living (Arnold 440).
As the US economy grows the demands for goods increases and many foreign companies start to invest, thus the existing ones expand their operations. Due to international trade, the US has become prosperous, this has greatly contributed to poverty reduction since people and companies have benefitted from net benefits or trade gains.
Pew Research Center affirms that free trade promotes huge chain of economic activity, and nations that conduct such trade tend to support peace. Due to free trade, individuals have benefited from economically free society, creation of new businesses, decent salaries, and thus they preserve all the benefits they get by maintaining peace.
Despite having providing many benefits to the U.S, free trade has many flaws that arise when the other nations involved in the trade refuse to play fair. Most U.S citizens argue that it is impossible to put in place the free trade laws, but it has been difficult to create a global free market. Others think that restrictions of trade are essential to protect the jobs available since other countries will do the jobs at lower earnings, and thus big companies will consider outsourcing their jobs, which will lead to high rates of unemployment (Palmer 1).
In terms of trade shortfall, as the shortfall increases, the U.S dollar will continue to weaken, resulting to an increase in interest rate, and thus countries that borrow from US will suffer. Such deficits will deter economic growth. Pew Research Center recommends that to avoid trade deficit, the number dollars spent on import should be equal to those of exports.
Moreover, in 2008, steelworkers were against free trade because they filed a case against free trade agreements. The pending agreement was the treaty between Panama, Colombia, and Korea. The workers rejected how policymakers dealt with the free trade issue. They claimed that NAFTA controlled the three treaties, which led to loss of many industrial jobs. U.S has suffered loss of jobs in manufacturing industries since 1993 when it signed NAFTA. In 2002, big companies in the US retrenched workers but hired others overseas: workers are now fighting for uncertain recovery of their jobs (Palmer 1).
In conclusion, free trade is vital to the US economic growth and success. Specialization has made the US companies to become more competitive and innovative. However, some people blame free trade for the loss of industrial jobs and others claim that it has driven the US producers to foreigners and uncertain competition. Other benefits of free trade include creating stronger institutions and infrastructure. In essence, U.S should consider building more trade agreements, lowering barriers to international trade, enhancing economic freedom.
Arnold, Roger A. Macroeconomics. Mason, OH: South-Western Cengage Learning, 2011. Print.
Palmer, Doug. “NAFTA Reform Just the Start – U.S. Trade Critics.” Reuters. 2008. Web.
Pew Research Center. “Obama’s Image Slips, His Lead over Clinton Disappears: Public Support for Free Trade Declines.” People Press. 2008. Web.