Free trade is not Free Trade : Labor welfare for the price of macroeconomic indicators growth

The free trade foundation is of comparative advantage. The countries that are involved should have a significant comparative advantage against its partner. This model should work perfectly if the agreement is exclusive between only two countries. So, for example Country Y, which has a comparative advantage in commodity A, B, and C, while Country Z, which has a comparative advantage in commodity D, E and F, the two countries can sign the agreement and shares the advantage of global trading. But Adam Smith, contrary to HC Andersen, could never guarantee a happily ever after ending, because unlike marriage, free trade agreement is not monogamy. Country Y, can also sign a free trade agreement with country X, which supplies commodity E, G, and H. It (Country Y) could also sign an agreement with Country W, which supplies commodity E, I, and J. So now, country Z, X, and W will compete in the market of country Y for the same commodity (E). So there is now a competition between them. But, what is wrong with the competition, isn’t all trades involves competition? Following opposition’s assumptions, given that consumers tend to choose the cheap between the convenient (scroll down, see No point 3) [[http://debatewise.com/debates/1053-poorer-countries-should-abandon-free-trade-agreements]], the competition between country Z, X, and W will become a "race to the bottom", where the condition causes the reduction of price to its lowest level. If they are richer countries that can subsidize their commodity there will be no problem. For example, Europe with its Common Agricultural Policy [[http://ec.europa.eu/agriculture/publi/capexplained/cap_en.pdf]]. For poorer countries, to preserve profits while keeping its competitiveness in unreasonable price, the only option is to lower its labour wage. Chile, as an example, is proud of its status as one of the most open countries in the world. It has signed 47 free trade agreements. [[http://www.oxfam.org/en/campaigns/trade/real_lives/chile]] In the agricultural industry, Chile exports products such as grapes (for wine), fruit, and salmon. The cost that Chile has to pay to preserve profit for transnational companies is an increased insecurity for millions of women workers; being paid below minimum and losing their labour right.[[ibid]] In the fruit-picking sector, 75% of women work more than 60 hours a week in season, on temporary contracts, and a third of them do not earn even the minimum wage. Half of these women have no contract, and therefore there is no welfare system to support them if disaster struck.[[ibid]] This is also evident in China with its textile industry. Minimum legal wages in the developing countries hovered around US$30-50 a month. This is equivalent in China to 240-400 RMB a month. The legal minimum wage in Shenzhen, the Chinese city with the highest minimum wage, is only equivalent to US$42. China has set its minimum wage standards very low, to the point that it is even compete with Vietnam and Cambodia - two countries where the cost of living is lower than in China. In Mexico, El Salvador and Nicaragua, the wage levels are slightly higher than Asian wages, but this competitive disadvantage is largely cancelled out by the proximity of Central America to the American market, the biggest market of textile. [[http://rspas.anu.edu.au/~anita/pdf/AChancp461.pdf]] China biggest competitor for US market is Mexico; today China and Mexico are competing neck and neck for the American market, each supplying around 15% of all apparel imports to the US. [[ibid, p3]]. Mexico, having their status as a country with FTA with the US, enjoys the advantage of geographical distance to the US. Along the US-Mexican border assembly plants called maquiladoras have mushroomed, employing about a million migrant workers in various labour - intensive industries. This number is still small compared to the 12 million in Guangdong province alone, but, justifying opposition’s claim on growth, it represents a 150% increase in Mexico since 1990 [[The Economist, July 7th 20 01, pp. 27- 30]]. The 150% increase is huge for an economic indicator, but align with our a priori before, the increase did not affect labour wage. The minimum legal wages in Mexico are almost double compared to Shenzhen, and this produces pressures on Mexican wage trends. In the manufacturing sector, real wages dropped by 20% during the 1990s. According to the ILO’s estimate, the migrant workers’ wages in Mexico’s apparel industry shed 28% of their purchasing power in the period between 1994 and 1999. [[http://rspas.anu.edu.au/~anita/pdf/AChancp461.pdf]] This is the bitter reality of free trade, which fails in increasing labour’s welfare, as a price of macroeconomic growth. Mexico is one of the countries that aware with this problem. That is why Mexico was the last country to sign a FTA with China, delaying China’s entry into the WTO. Mexico perhaps by now knew by learning from past mistakes, that when the trade barriers are removed, it would have much to lose. But the international pressure was too great for Mexico to stand its ground. [[ibid, p4]]