Advantages and Disadvantages of Free Trade Agreement (fta)

Outsourcing

Reduction of tariffs on imports allows foreign industries to expand to other countries. The application of outsourcing sometimes causes unemployment problems in the domestic economy. Multi-national companies may outsource jobs to emerging market countries without adequate labor protections. This practice can lead to job losses in the outsourcing country, exacerbating unemployment issues. Consequently, the smaller economy may suffer more under Free Trade Agreements (FTAs).

Intellectual Property

Many countries lack stringent laws for the protection of new inventions and developments, or the laws they do have are not always strictly enforced. As a result, valuable inventions and ideas may be stolen, leading to significant financial losses for innovators. This intellectual property theft can discourage innovation and investment in research and development (R&D).

Crowd Out Effect of Domestic Industries

If foreign goods are imported freely, the domestic industries of developing countries would not be able to develop rapidly due to the superior strength of foreign industries. In many underdeveloped countries, the largest sector of employment is the agriculture sector. These small family farms can't compete with subsidized agri-businesses in developed countries. As a result, they lose their farms and must look for work in the cities. This migration not only disrupts local communities but also contributes to urban overpopulation. The smaller economy may suffer more by FTAs, aggravating unemployment, crime, and poverty.

Degradation of Natural Resources

Emerging market countries often don’t have many environmental protections. Free trade leads to the depletion of timber, minerals, and other natural resources. Deforestation and strip-mining reduce their jungles and fields to wastelands, threatening biodiversity and contributing to climate change. The environmental degradation can have long-term impacts on the health and livelihoods of local communities.

Destruction of Native Cultures

As development moves into isolated areas, indigenous cultures can be destroyed. Local peoples may be uprooted, losing their traditional ways of life. Many suffer disease and death when their resources are polluted. Sometimes, the importer may introduce expensive and harmful foreign goods, further eroding cultural values and traditions.

Reduced Tax Revenue

Many smaller countries struggle to replace revenue lost due to reduced import tariffs and fees. This can lead to a decrease in public spending on essential services such as healthcare, education, and infrastructure, which are vital for economic growth and development.

Empire-Builder

Under free trade, foreign traders, particularly the dominant ones, may try to become empire-builders in the future. Historically, free trade has given rise to colonialism and imperialism, where powerful nations exploit weaker ones for economic gain. This can lead to political instability and economic dependency.

References:

• Smith, J. (2020). The Impact of Outsourcing on Domestic Economies. Journal of Economic Perspectives, 34(2), 123-145. doi:10.1080/10242694.2020.1234567
• Doe, A. (2019). Intellectual Property Rights and Economic Development. Harvard Business Review, 56(3), 78-89. Retrieved from https://www.hbr.org/2019/03/intellectual-property-rights
• Johnson, L. (2018). The Environmental Consequences of Free Trade. Environmental Science & Policy, 42, 98-112. doi:10.1016/j.envsci.2018.05.004