Last Updated 06 Jan 2022

Pros and Cons of Free Trade

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Introduction

Free trade is an agreement between two or more countries in exchange for goods and/or services without the enforcement of tariffs or duties and at a benefit for each country. Advocates in favor of free trade believe that it gives Americans a better standard of living because of the goods and services received at such low prices. Free trade strengthens the U.S economy, creates jobs, spreads the value of freedom, reinforces the rule of law, and helps under developed countries.(White n.d).

Most foreign countries can manufacture goods at lower cost so we pay less for them. Economists of free trade believe that when we sell more of our products overseas, American businesses can employ more people. Opponents who oppose U.S. free trade believe that it has caused many job losses here in the U.S and is not good for the economy. Many jobs overseas can be performed for a fraction of the cost of what American workers earn; so many U.S jobs are outsourced. Opponents also stress the unfortunate exploitation of workers in underdeveloped countries and the defiling of their resources.

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Lastly the free trade agreement is a little one- sided, the U.S buys more goods from overseas than what other countries buy from us.

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The advantage of free trade is the goods and services that can be bought at a reasonable cost. Also, the use of less expensive materials and labor acquired through free trade leads to a lower cost of manufactured goods. Dollar Tree is an example of how free trade has allowed this business to grow. This dollar store sells all of its goods for one flat rate of $1 to the American consumer. Normally, a pack of batteries would be $4.00 but at Dollar Tree it is $1. A large loaf of bread , frozen food, cleaning agents, head phones, pet supplies, baby clothes, toys, and more are just $1, all items are imported from either Mexico, China, Japan, Brazil or the Philippines.

“Deep discounts translates into savings in food and goods. Denise Froming of The Benefits of Free Trade: A Guide For Policymakers states, “Because of these low prices the U.S. economy has grown by more than 23 percent, adding more than $2.1 trillion to the nation's gross domestic product (GDP) and raising the wealth of the average American consumer by more than $5,500”(Froming 2000). Although, these are tremendous savings brought about by these imports, it would be better to see U.S jobs and more American products made here at reasonable cost.

The disadvantage of outsourcing jobs is how it impacts on American workers, for example in Ohio a once lucrative steel manufacturing company, named Republic Steel, became America's third largest steel company. Wikipedia states, “Republic Steel remained prosperous until the 1970s, but because of cheaper foreign imports, rising labor costs, and other factors they began to go under. In 1984 in an exchange of hands Republic merged into LTV steel but unfortunately, in December 2001, LTV filed for Chapter 11 bankruptcy.” (Wikipedia 2014).

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The steel plant was leveled and now in its place stands a Wal-Mart super
store, the size of three football fields. The benefits of discount pricing do not outweigh the drawbacks of not having jobs. Hundreds of jobs were lost when Republic Steel went under and we now get our steel from Mexico... Coincidentally, while writing this paper Ohio governor Kasich is bringing back Republic Steel with the help of a Mexican steel giant ICH who has brought Republic Steel out of bankruptcy.

Ohio is producing shale oil and will need a steel plant to make pipes for gas lines within the next year. The average income with overtime and night shifts will be $50,000, and if this deal goes through it will inject more money into Ohio’s economy.(Schoenberger, 2011). In the U.S you have to pay at least minimum wage so, some companies who want to reap a high profit go to other countries and exploit those workers. For example a pair of Michael Jordan tennis shoes made in China and Vietnam for around $7 resells for $70-180 here in the U.S.(Wiki n.d)

The workers that produce these shoes in sweat shops make less than $2.46 per day with no benefits. (Jonathan n.d). The entrepreneurs who exploit the resources and labor of third world countries discredit what free trade is all about. What is needed is a balance of goods and services along with keeping a fair percentage of jobs for Americans. There should also be some way to police entrepreneurs from exploiting the resources of other countries.

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