Benefits of Free Trade Agreements

The Role of Free Trade in the United States

The United States is a land of free trade in itself. As Americans, we take pride in our nation’s capitalist ways. Free trade is a fundamental element of a peaceful and efficient society. As such, I believe that international free trade agreements are not only in the best interest of the US, but in the best interest of the rest of the world as well. That isn’t to say that free trade agreements are not without their potential faults either; it is true that these international trade agreements open up plenty of room for trading opportunities. Unfortunately, this also opens up more opportunities for economic corruption and exploitation, leading to war and severed ties between nations. In theory, however, I do believe that free trade agreements can be highly beneficial between nations that have neutral or positive relations.

Benefits of Free Trade Agreements

There is a reason that the United States practices different levels of trade with certain nations. As of 2015, we have had Free Trade Agreements (or FTAs) with 20 different nations. Among these nations are Chile, Australia, Jordan, Canada, Mexico, and Japan (International Trade Administration, 2015). It is notable that these are all countries with which the US has maintained positive or neutral relationships. While there are limited trade agreements with other nations such as Russia and China, these nations often mutually sanction the United States in terms of economic support. While the idea of FTAs is appealing, the lack of these agreements has sometimes proven to be in the best interest of conflicted nations.

Times of war have often been tied to economic meltdowns. Since Free Trade Agreements open up more possibilities of war, it is important to maintain these agreements with countries that can be trusted. Additionally, it is important that the countries of trade are able to mutually benefit from free trade with certain nations. “Recent realizations of war reduce the gain of a FTA because outbreaks of war increase the political costs of FTA negotiation” (Martin et al., 2008, p. 3). This can be implied as to why America has limited trade agreements with other nations that are not on the best terms with us. Coincidentally, many of these nations pose a potential threat to the US in the event of a war breaking out. Many of the countries that America conducts free trade with are either alliances or other countries which pose no political or military threat to us.

There are some very clear benefits as to why free trade is necessary, at least among some countries. While it is in the best interest of the US to limit or refuse trade with some nations, they can be very beneficial if implemented correctly. This is why there are limited member nations that the United States has agreements with. It can be argued that many of these countries, such as Japan, Canada, and Australia, are countries of free trade mostly for political reasons. Countries like these have had socio-political ties with the US since the 20th Century. Naturally, it is a good idea to maintain these relations in the event of a war. Moreover, FTAs can strengthen diplomatic relationships and offer a platform for dialogue and cooperation on other issues beyond trade.

To some extent, political relations have always played a role in the trade limitations between countries. The United States is no exception to this, hence the reason why we do not have FTAs with many countries. Still, if Free Trade Agreements can be successfully instituted and peacefully maintained, they can significantly improve the economies of importing and exporting countries. “Government policies support various components of growth—by fostering the growth of human capital, facilitating the process by which firms make productive investments and, above all, creating a favorable environment for seeking and implementing real cost reductions. Government policies cannot create these forces, but government can and should open the door” (Harberger, 1998, p. 4). Free Trade Agreements not only boost the GDP of both countries, but they also help to stimulate the economy in general. While almost all trade is measured in monetary amounts, it is conducted through the exchanging of products. This means that one country might use their resources to produce a certain value’s worth of a product and exchange it for another product(s) from other countries. The value of exchange will likely be the same in terms of monetary value, but FTAs allow room for negotiation in this aspect.

Impact of Free Trade on the Global Economy

Money or investments can also be tied into free trade, which ultimately affects the world economy as a whole. Regardless of the various trade agreements, the global economy can be significantly affected by the global stock markets. These all fluctuate according to events all over the world. In a sense, I think that this makes any trade agreement obsolete in the end. Free Trade Agreements open up opportunities for war and redemption if financial crises break out around the world. We are already inflicting detrimental economic effects upon much of the world, regardless of the relationship status with other countries. “The United States is floundering in the global marketplace, incurring devastating losses in market position, profits, equity, and jobs” (Choate & Linger, 1988). Theoretically, I believe that Free Trade Agreements are a positive solution for boosting the American economy. If this type of agreement is made with the proper nations, I believe that economic liberation can be conducted peacefully under normal circumstances. Doing so has helped the United States, both politically and economically. Normal circumstances never last forever, though, and thus FTAs cannot be considered to be the saving grace of the US economy, or any economy. The dynamic nature of global economics requires constant adaptation and reevaluation of trade policies to sustain benefits.

References

• Choate, P., & Linger, S. (1988). America in Ruins: Beyond the Public Works Pork Barrel. Duke University Press.
• Harberger, A. C. (1998). Government and Growth: The Role of Government in the Expanding Economy. University of Chicago Press.
• International Trade Administration. (2015). Free Trade Agreements. Retrieved from https://www.trade.gov/free-trade-agreements
• Martin, P., Mayer, T., & Thoenig, M. (2008). Make Trade Not War? The Review of Economic Studies, 75(3), 865-900.