How is the Economy affected by Free Trade?

Question

Can anyone help please.
I'm doing a study and i'm stuck on this one question, I need to know the main keys to arguments for and against - Good and Bad

Answer 1

Since I don't want to write a book I'll shoot from the hip and try to give you an idea.

The good:
Free Trade allows for companies within the United States to market their products all over the world. This is good for the company as it give them a larger market base.
Free Trade allows companies to move manufacturing and services overseas to allow them to take advantage of cheap labor. This is good because it allows companies to improve their P&L because of a wider margin of profit.
Free Trade is good for the consumer because it allows for services and goods to be purchased from other countries cheaper than when the import taxes where in place.

Now for the REALITY of Free Trade:
40,000 manufacturing and service companies have moved their operations overseas since 1996 while still retaining US company status. This give our GNP a false number; it being much lower than it actually giving Americans a false sence of the countries worth.
Lower tax base because profits made overseas have a much smaller income tax levied on them. They also have negligible capital gains taxes.

4.5 million high paying US technical and manufacturing jobs have been lost because of Free Trade and the above scenario.

Free Trade means a greater number of highly educated engineers and scientists are brought into the US by applying for work visas. These people work for about 1/3 of what their US counterparts expect. This further increasing the competition for jobs and lowers the overall wage of the working class.

Free Trade enables 3rd world countries like South African Nations as well as extremely poor countries like China and India to enact economic slavery for their populace. This is done by raising the standard of living only slightly for a few thus destroying the local economy and making the indigenous people dependant upon foreign work.

Free Trade is good for big business and bad for the workingman. Eventually, if the world survives and according to the politicians and economists, things will even out and we will have 9 billion people (2015) all with the standard of living like the industrialized nations. This, of course, is not the case. For example, if China continues to industrialize it will be using 97% of the worlds resources and emitting green house gasses at a rate of 19 times what the US’s current output is; all this by 2015. I believe that the world will be polluted and out of resources long before the standard of living comes for everyone comes up to US standards now. Our standard in this country continues to degenerate. It is a classic case of the aristocracy (big business) and serfs (everybody else).

Answer 2

Ok I will attack this question from a very academic stand point. The Romer model states that if countries produce a good that they have comparative advantage in and trade for a good they dont have comparative advantage in both sides will benefit from trade. Hecksher-Ohlin took the Romer model further with adding transportation costs and different factor endowments. If countries trade so they are maximizing the utility they are reciving from trade both sides will benefit. The major problem with trade in the real world is their are not alot of restrictions on trasnacional corperations that go to developing countries and trade with them so the country gets praticaly nothing and the company gets a ton of benefit. Trade is more benefical in countries where both sides are at a similar technology level. When a country with a high technology level trades with a country with a low level the poor country gets screwed. The moral of the story is free trade can be beneficial to both sides if regulations are in place that the trade is kept fair. This is why the WTO (world trade orginization) regulates trades so no side gets hurt because of what I spoke of earlyer. The Romer Model and the H-O models are a great place to start learning about trade. They are the bedrock of which most trade theory is based.

Answer 3

On Free Trade, people in labor force will have the level of salaries in a certain areas, thereby dictates the prices of commodities in particular.
Also traders will get less and would be out of job if it went astray, as the direct 'buy and sell' would commence among the trade. so, it means from source to buyer would be inevitable..

Answer 4

Good: Consumers can buy whatever they like, Entrepenurs can organize what they like, and workers can work where they like

Bad: Government has limited influence