Free trade agreements are more harmful than helpful

Ok, I’ll rebut Pro’s R2 arguments. R1: Free Trade Increases the Trade Deficit and Kills Jobs! We Have a Trade Surplus or a Capital Surplus First, the trade deficit is harmless, it is offset by a capital surplus. The flow of funds in international trade must be balanced. Exports + Factor Income (inflow) + Transfers (inflow) + Asset Sales (inflow) = Imports + Factor Income (outflow) + Transfers (outflow) + Asset Sales (outflow) The Mexican people aren’t going to hide their Dollars under a blanket. They will either buy U.S. exports, purchase U.S. assets and channel capital into our economy, or save their Dollars and therefore infuse them into our financial system. Trade is not a zero-sum game – we all benefit! Jobs Let’s be clear – jobs (labor) are an input. What the American people need is a productive economy. If we can achieve higher productivity while minimizing input costs such as labor – we all benefit from a more efficient and dynamic economy. First, NAFTA has helped America’s economy. Scholars have found that, “[Because of NAFTA] North American firms are not more efficient and productive.” The Congressional Budget Office has found that NAFTA has overall benefited the United States, “jobs lost in industries producing tradable goods are offset to a greater or lesser extent by jobs gained in construction and investment-goods industries because of the inflow of foreign investment that must accompany the trade deficit.” [3] Second, even if Pro’s claim was correct, it would be relatively insignificant portion of the job churn rate. Over the last 12 months up to April 2015, 60 million jobs were created while 57.2 million were destroyed, according to the Bureau of Labor Statistics [4]… and this is only a single year. If we were to extent this to the length of NAFTA’s lifespan, it would only have effected 1 in 1,200 jobs (0.00083%). This is more than offset by the savings from more affordable imports. Trade also strengthens American businesses. Over 55% of U.S. imports [9] are intermediate goods, so these imports are used to lower the cost of business for American supply chains. By expanding productive capacity, it allows U.S. businesses to engage in job creation and raise wages. R2: Free Trade Breeds Unfair Competition! Multiple Factors influence Trade Pro is assuming that since labor costs may be lower in developing countries, trade unambiguously harms U.S. workers. Businesses take into account many factors when it comes to trade, such as: Input costs (labor, energy, raw materials) Human capital (availability of skilled workers) Physical capital (cost of factories, tools, machinery) Government policies (bureaucracy, tax laws, debt levels) Pro says because we have higher labor costs, we will lose. America has a skilled workforce, abundant physical capital, among other advantages. American energy is also very affordable – energy is 4x more expensive in Germany and is a major reason firms are planting down roots in America [4]. The United States is the best place in the world for foreign investment [6], according to empirical data. We leverage affordable energy, a skilled workforce, abundant capital stock, and a relatively functioning government. Why would we throw this away? R3: Trade increases Inequality The impact on trade has been to benefit consumers and workers. The National Bureau of Economic Analysis found that NAFTA has led to higher wages – by 0.17% in the United States [5]. This form of higher earnings is the fruit from trade, allowing workers to produce goods where America has lower opportunity costs. This also doesn’t include the fact that consumers save over $2,000 a year in reduced prices. Inequality itself is irrelevant. Trade leads to a more efficient and productive economy, which leads to job creation and broad prosperity, so it is a noble policy. R4: Trade has a Negative Impact on the Environment, Working Conditions The Environment One of the most important indicators of environmental quality is the level of economic development. Developing nations, such as India and China, have more pollution and dangerous emissions. Once nations become more prosperous though, the firms can invest in technology that cuts back on pollution. Trade helps nations develop economically, which is why some research has found that “Freer international trade improves the environment.” [8]. The scholars also found that trade has a minimal effect on the environment, because there are many more factors at play. America has many advantages that outweigh the potential costs of environmental safeguards. Working Conditions Forced labor and abuse is deplorable. It shouldn’t be condoned, but it is. It isn’t a consequence of trade. It is a consequence of corrupt and inept governments. Trade also generates innumerable opportunities for workers. The working conditions and pay may be low compared to our standard of living, but they are better than the status quo. As one economist noted, “Not only are sweatshops better than current work alternatives, but they are also part of the process of development that ultimately raises living standards.” [8] R5: Why Not Autarky? Pro is saying that free trade is harmful. Why then do we be completely self-sufficient (an economic autarky)? Ideologically speaking, “fair trade” will probably lead to more open trade over time. What has autarky – complete self-sufficiency – meant in reality? Cutting off international trade damages economic development, people’s standards of living, and political environments. Some successful examples of autarky include: Afghanistan under the Taliban India (before 1991) North Korea Iran (to an extent since the inception of its nuclear program) Cutting off trade hasn’t helped. Indeed, it has worsened the people’s standards of living. We should thus take notes and embrace a policy of free trade. Conclusion Free trade is beneficial for all nations that partake. Nations and firms can specialize in their comparative advantage, and through trade can minimize opportunity costs. High-income states like the USA can produce capital-intensive goods such as aircraft, computer processors and vehicles. Low-income states such as Mexico can produce textiles and foodstuffs. Through trade we can acquire more wealth. Several advantages of free trade: Strengthens American businesses (more affordable inputs) Generates high-quality jobs (finance, advanced manufacturing, etc.) Increases economic efficiency and dynamism Lowers costs to consumers (about $2,000 a year) Improves socio-economic and environmental conditions in developing states Fosters peace and mutual respect Citations [1] http://www.bls.gov... [2] http://bookstore.petersoninstitute.org... [3] https://www.cbo.gov... [4] http://www.thefiscaltimes.com... [5] http://www.nber.org... [6] http://www.politifact.com... [7] http://www.perc.org... [8] http://www.econlib.org... [9] http://www.cato.org...