Trade Agreements

It is an ill wind that blows nobody good. Trade agreements hurt some people and help others:

Advantages of Trade Agreements

• Trade in general increases. The economy as a whole is stimulated. Mainly the wealthy benefit. Even the middle and lower classes enjoy lower prices for consumer goods.
• There is greater specialisation which improves the quality of goods and lowers cost.
• Trade agreements create ties between countries that help forge peaceful bonds.
• Exporters have access to larger markets. They can offer lower prices. This increases their sales. This works primarily for exporters who specialise.
• Importers can buy goods all over the world at cheaper prices without tariffs.

Disadvantages of Trade Agreements

• Businesses flee the country to places where labour is cheap. People lose their jobs.
• Foreign corporations gain veto power over environmental legislation. In theory, this need not be so, but in practice it is always a part of the agreement.
• Governments are hamstrung. They cannot do anything that would reduce foreign corporate profits. Again, in theory, this need not be so, but in practice, it is always a part of the agreement.
• Massive amounts of goods are shipped all over the world, emitting more greenhouse gases in the process. As we get more and more serious about climate change, this factor will rise in importance.
• It requires extra energy to transport all those trade goods. As fossil fuels run out, those prices will inevitably rise.
• Countries no longer have a reliable local food supply or a supply of basic goods. The supply can be disrupted by national disasters in other parts of the world, or by wars or blockades.
• The economies of third world countries become less stable. Overnight, corporations move operations to a new country with labour a few pennies cheaper.
• There is global race to the bottom for wages, worker safety and worker health. The third world competes with the developed world more directly for the lowest wages.
• Shipping goods all over spreads disease and invasive species.

Reneging on Trade Agreements

Donald Trump has said he will make the USA revert back from a free trade policy to a protectionist one in order to save the jobs that were lost under free trade. He suggests reneging on all trade agreements. I don’t think this is wise for the following reasons:

• Breaking your word is a serious breach. There is no guarantee other countries will ever negotiate any kind of treaties with you ever again, knowing you will renege if ever the treaty favours others. Trade agreements have legitimate, but time-consuming ways to get out of them. You must be patient to maintain your reputation.
• After the break, protectionist tariffs will allow former exporters to sell to the domestic market. However, their global export market will dry up because of tariffs their competitors have to pay. With a greatly reduced market, they will have to lay workers off and might even have to close plants or go bankrupt. Ironically, we would have the exact opposite of the intended effect.

The essential problem is corporations do not care in the least about the welfare of workers. They have no loyalty to any one country. All they care about are profits. They don’t give a hoot what their trade agreements do to ordinary workers. The solution may be trade agreements where only fair trade goods may be exchanged. Further, retraining needs to be an integral part of every trade agreement.

~ Roedy (1948-02-04 age:70)