|Free trade agreements raise the economic capacity of partner countries|
By Richard Craft
Although many Americans do not realize this, international trade policies have a significant, although indirect, effect on individuals within the United States. While these policies are frequently negotiated behind closed doors and away from the public eye, they impact the economy in a number of ways. Trade policies can affect employment numbers as well as spending, as trade policies can encourage or decrease the exports of a number of goods. Americans should be aware of the impact that these trade policies have on their everyday activities and livelihoods.
International trade policies
Throughout the history of international trade policy within the United States, there have been a number of agreements that have significantly affected the economy of the nation. One of the most heavily impactful has been the North American Free Trade Agreement between Canada, the United States, and Mexico. As a method of policy, the trade agreement has allowed completely free trade between these three countries without the implementation of trade barriers or tariffs on certain goods and sectors.
The North American Free Trade Agreement had a significant impact on trade between the United States and Mexico, as both countries experienced significant shifts in economic capacity as a result of these policies. Within the United States, low-cost industries shifted to the Mexican border, where they could exploit the skilled yet cheap labor within the country while taking advantage of the infrastructure network in the United States.
The South Korean and U.S. Free Trade Agreement allowed free trade between the nations of South Korea and the United States. Although the nations have experienced deep political and economic ties in the past, significant trade barriers existed between the political allies. For the United States, the trade agreement had several benefits in which certain exports were prevented from reaching the U.S. market without affecting key exports of the United States. Through such maneuvering, the United States experiences several benefits. However, the trade agreement did not heavily feature services, which is a significant economic strength of the United States. Within the both countries, there were significant detractors from the trade agreement as well as organized political opposition to its implementation.
Effects on everyday Americans
One of the main ways a trade agreement affects the United States is through the loss or gain of jobs. Although trade agreements are designed to be mutually beneficial, oftentimes they lead to the destruction of industries within countries due to an inability to compete. Within the United States, manufacturing suffered significantly, as it could not compete with the low cost production and low labor costs within Mexico. This led to a mass exodus of labor-intensive industries such as automotive parts manufacturing and assembly, and a loss of jobs for unionized American workers.
The job losses continue to plague the American economy, as these trade agreements have forced American manufacturing to focus on automation and heavy industrial goods instead of light consumer manufacturing. Communities that were dependent on these manufacturing jobs were heavily affected, as frequently these communities were dominated by a single manufacturing plant or industry. Textiles and manufacturing were severely affected by the implementation of NAFTA, and the U.S.-South Korean Trade Agreement is expected to negatively affect the automotive and services sectors of the economy.
About the author: This article was written by Richard Craft, an MBA student who loves sharing his knowledge so you can understand the international business environment better and modify your financial planning accordingly. He looks forward to further helping you make better financial decisions for the present and for the future.
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