Who wins and who loses from free trade? Why is there so much opposition to free trade?

Answer 1

Those who win are the consumers, who get to enjoy lower prices and better choice. Those who lose are the producers (meaning both business owners and workers) unable to compete.

The reason there is opposition to free trade is that its gains are widely dispersed and thus easy to overlook, while its losses are highly concentrated. If an advanced country with 40-million population and $600 billion GDP saves $2 billion a year (or $50 per person a year) because of lower prices on some daily staple, it's almost invisible. If, however, the local manufacturer of that staple has to go out of business and lay off 2,000 employees, that's a scandal...

Answer 2

It's hard to be objective on this subject but here it goes.
Corporations like free trade because it keeps costs down, and therefore products cheap, and therefore profits high. Consumers love it because it makes the things they buy cheaper and therefore they can get more for their money.

The debate comes when you look at the workers.
1. Many people work for non-livable wages and in horrible conditions. Some kids work for 12 cents an hour or 60 cents a day depending on the factory.
-The opposition to this is that 60 cents goes a lot farther overseas then here, and while it sounds like it's not a lot, they can buy somethings. These people do rely on the paycheck they get, and without it could possibly be worse off then they are. Some countries have nothing else to offer but labor, and the factories that are there spark the economy and may eventually act as a building block for the economy to grow.

It's a real gray area, while the people need the work, I feel they should be better compensated. The U.N. defines Abject Poverty as living on less then a dollar a day. I don't care where you are, that's ridiculous. It costs less then two bucks to produce a pair of Nikes, and over a hundred to buy them, the people that are loosing are not the CEO's, but the people getting gyped in the production phaze and the consumer who pays way too much.

Answer 3

There are some decent responses already. My two cents:

the biggest winners are the people with money and own operations that produce goods, because they can relocate their production centers and generate lower cost products that are more competitive yet retain a healthy (for them) profit margin.

The biggest losers are the people employed (or formerly employed) in lower skill production jobs, because these are the easiest to move to new areas, transferring those former workers into lower paying jobs (if they get jobs at all). Most of us others benefit from lower priced goods, and although the benefit isn't huge, it isn't negligible either.

The one consideration that is often ignored is that the companies employing those lower skilled workers would not have remained competitive in the global economy and those jobs would have been lost eventually anyway, or the workers would have had to start accepting pay scales equivalent to elsewhere, which would have been very difficult given that the cost of living is higher at the old production centers than it is in the new production centers. (that is to say that the status quo was untenable and doomed to change anyway, even without free trade, although the time frame may have been stretched a bit longer).

It is for these reasons that I give free trade a qualified thumbs up.

Answer 4

Economies at the home country win from free trade in the form of lower prices, if and only if the loss in jobs does not affect purchasing power parity. Also workers in the foreign country gain from the influx of jobs and the raised standard of living, even though most workers make a dollar or less a day, meager by our standards, it actually raises their standard of living. Workers here who are displaced, are the losers and so is the home government who loses tax revenue from sales and income. There is a lot of opposition because the low wages are seen as unfair competition and therefore they are losing their jobs, which of course would make anyone mad. Also it's seen as unfair because governments often give incentives for companies that go abroad, meaning that governments pay for companies to lay off people. Hope this helps. _Graduated in may with a degree in economics!

Answer 5

The elites win, the people lose. Likewise, exploitation in foreign countries becomes more common, as it is made more possible. Opposition is based on the exploitation and on the loss of domestic jobs that result from off-shore outsourcing primarily.

It does not strike me as incidental that since the U.S. began increasingly free trade, it has fallen from being the most desirable place in the world to live to (this year) the 12th highest. That index takes into account real income per capita, education and so forth.

Kind thoughts,

Reyn
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Answer 6

The Stolper-Samuelson theorem is a basic theorem in trade theory. It describes a relation between the relative prices of output goods and relative factor rewards, specifically, real wages and real returns to capital.
The theorem states that — under some economic assumptions (constant returns, perfect competition) — a rise in the relative price of a good will lead to a rise in the return to that factor which is used most intensively in the production of the good, and conversely, to a fall in the return to the other factor.
http://en.wikipedia.org/wiki/Stolper-Samuelson_theorem

In General when a rich country trades with a poor country the wages in the rich county falls and the wages in the poor county rise. The reverse is true for the returns to capital. So the rich in rich countries get richer but in poor countries they get poorer.

Answer 7

I doubt many would oppose free trade if it were fair trade. How do American employers and manufactures compete against far eastern country's using slave labor and subsidizing there manufacturing.

I earn $30.00 per hour plus benefits for a pay package of $45.00 per hour. How does my employer compete against someone that is paid $2.00 a day. And don't tell me to take a pay cut when the top C.E.O's. earn 400% more then there average employee.

Answer 8

Both parts win!