do you support open trade policy? Why and give and example?

Answer 1

No, I do not believe in free trade. Until recently seeing the problems of the corn farmers in Mexico though I thought it was only harmful to us. Basically, free trade takes our jobs and ships them to countries where companies can pay lower wages and thereby manufacture products cheaper to sell here. Which people buy because they cost less. This puts more of our citizens out of work because we are not buying the more expensive products they are manufacturing and there are no tariffs to equalize this difference with free trade. We apparently can do the same thing to Mexico now by undercutting their price of corn so we put their farmers out of work. Which just means more of them will illegally cross the border to take jobs for lower wages that legal citizens here could and should have.

Answer 2

I agree with most of the above well-answered responses and just want to emphasize a couple of points.

It was mentioned that environmental regulations are a factor against free trade - this is not a small issue. If a manufacturer in another country can produce items cheaply because they are allowed to pollute heavily (and thus achieving a lower overall cost), then I believe this is an example where free trade simply does not work. If every country was a hermetically sealed bio-sphere, then I wouldn't care, but the reality is that we end up drinking the same water eventually and a lot of the above pollution will find its way back to our food (ie, you get what you pay for, in this case, it's carcinogens in your shellfish in exchange for saving $.80 on your semiconductor widget).

Another problem is in the economic/legal environment. Theoretically consumers benefit from the gains in trade because we live in a free market economy, right? And the lower-cost workers gain by being gainfully employed and can work towards a better future, right? Well, not always. In many cases on both sides of the equation, it doesn't work because of the abovementioned legal/economic structure. Consumers don't always capture the full benefit of free trade if the particular market is not perfectly competitive and like someone else mentioned, if working conditions and worker's rights are exploitative on the lower-cost producer's side, then they will never be able to work themselves towards a better life.

An additional point regarding the importance of a good government is the issue of dislocated workers in the higher cost country. Although it is not 100% the government's responsibility, it would be very helpful for the government to manage the process of having to change careers due to free trade. Whether or not the government can achieve this efficiently is debateable.

Also, one important example to look at are Japan and Germany. Both countries have managed to remain cost-competitive at producing automobiles, despite high general wages and living standards in both countries (although, one has to admit that neither is a particularly good example of a tariff-free economy and both have lower PPP living standards than the US). Cheap labor does not always equal most efficient labor as several of the other responders pointed out.

As with any broad question, the answer has to be "it depends" :)

Answer 3

I'm studying economics too. But I am not as certain if open trade policy in the way it exists now is really optimal. The whole theory one learns in a book has been perfectly described above.
The only problem about theory, as far as I have learned is that it always assumes that there is something a country has a comparative advantage in producing, this is even proven.
My question is however what happens if the goods that a country has a comparative advantage in are just to few to support a stable economic growth.
And I believe there is another issue at hand that economists overlook, it is the power of innovation. Because of technological advance and improvement in effectivity a lot of workers lose and have lost their jobs (industrial revolutions). The question I would like to raise now is whether we are able to invent constantly new jobs as to be able to employ everybody who wants a job. Is it possible that we come to a point in which our already very consume oriented society simply won't be able to provide jobs to everybody who wants a job, simply because of the rise in productivity?

Answer 4

free trade simply forces each individual nation to specialize into what each nation does most effectively. it makes the goods the most cost effective.

Right now China is the most effective at manufacturing due to the significant numbers of people they have. They are, therefore, getting all the manufacturing work. We buy their stuff because we like the cheap prices. (I would dare anyone to do a personal boycot on goods made in China - it would be difficult). (This is ok as there are plenty of U.S. people (truckers, merchants, longshoremen, etc.) making lots of money selling the Chinese made goods.)

The US is best at financials, pharmaceuticals, and software (in other words - money and brain power). America must remain the most innovative country - otherwise... The US is also the best at maximizing food production (grain yields per acre) - great for economic stability! The only manufacturing that will survive is one that can have increased productivity (robotics...) to the point it offsets the cheap foreign labor costs.

If one in the US wants to hold on to a manufacturing job that isn't here anymore, so be it - it is a free country. Will you please take advice to become a member of the service economy? Become a truck driver, engineer, start an alternative fuels company, build a highway, healthcare (just make sure it is a position that cannot be offshored)... There are many opportunities in this great country, we just have to be adaptable. The only constant is change...

These are laws of economics that aren't addressed very efficiently through policy (example: US puts import tarrifs on steel, Asian countries counter with tariffs on Florida oranges and citrus)

There is something that concerns me though:

What happens if China is no longer our friend (i.e., they take over Taiwan)? Will we even be able to make t-shirts for ourselves when we scuffle with China?

Answer 5

As an economics major this question is quite rudaimentary. Free trade is great because it creates wealth. It creates wealth for the following reasons:

Take advantage of specialization (everyone makes what they are best at and then trades)

Take advantage of terms of scale (If a small country like luxenburg had to produce everything domestically, they would not have a large enough industry to produce nearly what they need, hence they wouldn't be one of the richest countries in the world per capita)

Resources (everyone should make what they have in abundance, whether it be in capital, labour, land, or human capital - it dosn't make sense for Canada to sell computers to Japan in exchange for Japanese wood).

Tastes - some goods have a greater value in one country than in another, they should be utilized in the country where they have the greatest value.


that being said, there are good counter arguments to the above.

Firstly, the argument about a loss of jobs is not a good argument. Despite all the rhetoric you hear about the USA losing all of its jobs, the unemployment rate has remained constant in the country. They lose low paying jobs to third world countries.

In a large economy like the United States, it can be economically beneficial to impose tarriffs on small countries if the dead weight loss is less than extra money that the country makes due to import taxes.

There are also other arguments like the race to the bottom (the country with the lowest environmental standards gets investment)

Loss of culture (ppl lose their ethnic history, culture blah blah blah)

Sweat shops

Retaining support in a democratic country and implimenting free trade is not always possible - EU countries.

any questions on this get back, i'd be happy to answer. The world's foremost specialist on this topic is probably bhagwati. Read in defence of globilization if you want to see what an expert has to say.

p from the p.

Answer 6

I support open trade policy because; we are now in a global environament. The internet itself has contributed to this. If we do not support open trade we risk alienating ourselves even more than we already have politically. Sell what we can sell, which is beginning to become a smaller and smaller market. If we are able to sell anything to any country (barring any weaponry) It will help in our global reputation.

Our current reputation is polluted to say the least. I believe open trade can help in many respect, especially respect int the environment our current administration has created. If we can trade with ANY product we would be lucky.

Already our jobs have been shipped oversees. We need a market.

Answer 7

Yes. An open trade policy, for most intents, means no tariffs on either end, which means cheaper prices for consumers.

Consider this: you have a product made in the U.S. and one made in China. The U.S. product costs 20% more than the Chinese product. So we levy a tariff of 25% on the Chinese product to make it more expensive, and induce consumers to buy the U.S. product. U.S.-made products are purchased, but everyone pays more than if the Chinese product were purchased. The U.S. industry has no incentive to become more efficient, while the Chinese one does. Eventually, the Chinese manufacturer comes out with a product that is cheaper and of the same quality even WITH the tariff. So we're propping up an untenable business that is ultimately unprofitable, for the sake of, what maybe 200 jobs?

It is best to let unprofitable businesses die so that resources can be put towards profitable ones. In the same way, we should not bail out Wal-Mart once their flow of cheap Chinese goods runs out (due to intense inflationary pressures in China).

Answer 8

i support fair trade.country's that basically have slave labor and can dump there products in this country at a price that company's who pay a decent wage cant afford to sell for should have to pay penalty's so that the playing field is level for everyone

Answer 9

yes and no. it's very complcated. it probably works for the banks, and big business. but it don't do sh't for the majority of us.