Free Trade: America Should NOT Protect Industries from Foreign Competition
Many politicians oppose free international trade, trade without any restrictions, for a couple of reasons. From their point of view it would affect the United States in several ways:
1. Many USA workers would lose their jobs because factories would be moved to the
country with whom the U.S. has a Free Trade Agreement, and where working force
is much cheaper.
2. Importing foreign goods and services without tariff into the United States makes
it harder for domestic industries to compete with lower prices and better
quality of foreign competition.
3. Some politicians feel that it is not the right decision to have open trade with
countries where the workforce is forced to work and where prisoners are used as
Because of these reasons, politicians who oppose Free Trade, feel that the U.S. should have some kind of restrictions, such as protective tariffs, import quotas, non tariff barriers, and/or export subsidies. However, some politicians and economists feel differently. They say that if some country would raise its barriers in order to reduce imports and stimulate production, the country whose exports suffer may raise its barriers, too. This would cause a trade war. The trade war would effect every nation in lower output, income, and employment; example is the Smooth-Hawley Tariff Act of 1930.
The United States is enjoying its second longest period of sustained economic expansion with real GDP growth averaging over 2.8% during the years 1992-96 and accelerating to 3.9% in 1997-98. The United States’ strong economic performance is due in part by trade and investment liberalization resulting from the Uruguay Agreement and the North America Free Trade Agreement (NAFTA). The openness and freedom of the economy has contributed to improving the competitiveness of the U.S. producers, creating more and better paid jobs, which in turn raised labor standards and reduced poverty. At the end of 1998 the unemployment rate fell to 4.5% and consumer price inflation to 1.6%, which is the lowest level since the 1960. This outstanding macroeconomic performance has been greatly followed by a large and growing current account deficit, which in 1998 reached a record level of $223 billion (2.7% of GDP). The trade deficit has enabled the U.S. economy to keep up with its strong rate of growth.
Open economy brings imports, which are often at a lower price, and they help to satisfy...