The demise of the Cold War in the 1990s was followed by a reaffirmation of ideals, principles, and values of liberal democracy courtesy of some western countries led by the United States and its allies. Capitalism and its political values derived from liberal democracy emerged as the new socioeconomic ideology in virtually all world economies. Freedom of the individual and communities from the strict control of the state was endorsed. The new ideology held that individuals and communities are inherently free to develop themselves by way of accumulating wealth through free trade and exchange of goods, services, and ideas (Somerville 73). In other words, the strict control of trade, businesses, and industrialization by the state, advocated for by socialists led by the USSR and its allies during the Cold War, was opposed and victoriously denounced by the capitalists’ camp under the leadership of the US and its allies. Surprisingly, during the recent past, Americans have become increasingly concerned about free trade. Public views of the national economy have continued to be quite negative, and more Americans are now taking a much more critical view of free trade agreements. The purpose of this task is to explore the impacts of trade liberalization on the US national economy and public views of free trade agreements.
Trade is certainly a momentous impetus of growth and development in virtually all societies. Therefore, people from all world civilizations have always sought to engage in an exchange of what they have in surplus for what they lack and want. Rogowsky argues that trade is an engine of growth because it facilitates income gain irrespective of whether the exchange takes place between individuals, groups, or between nations (6). Trade like any other human activity is and has been underpinned by the main ideas that inform human interaction at the local, national and global levels. The Cold War was fundamentally an ideological feud between the West, led by the US on one hand, and the East, led by the USSR on the other hand. The feud revolved on what ideology should underpin human socioeconomic and political activities at the national level, as well as, international level. These differences were partly influenced by the increased globalization of trade and other human activities. The US sought to spearhead the spread and embracement of her preferred capitalist liberal ideology while the USSR sought to persuade countries to adopt socialist ideology in which the state strictly controls trade, industrialization, and other human activities. The capitalist camp won following the break up of the USSR, and that marked the beginning of entrenchment of the ideas of free trade at the national level and internationally.
Essentially, free trade derives its breadth from the liberal ideas of freedom of individuals and communities to develop as they wish guaranteed they obey the laws of the society. At the international level, nationals from different countries were deemed free to develop themselves through the free exchange of goods, services, and ideas with countries of their own choice provided they did so within the matrix of the international and regional trade agreements, resolutions, and statutes, which regulate the conduct of countries in the field of global trade. Supporters of free trade held that the removal of tariffs and other trade barriers between countries permits productive resources to move freely and be put to their most efficient use in other countries (George 289). In other words, it allows countries to exchange what they have in excess with what they need from other countries thus facilitating a fair global distribution of resources in terms of goods and services, as well as, human resources. Those who espouse the ideology of liberalized trade maintain that it ensures that resources are put to use where they are highly needed. Therefore, such a move facilitates their efficient use. Furthermore, those for free trade maintain that there is evidence to the effect that open economies grow faster than protectionist economies (Rogowsky 40). Free trade supporters maintain that it enables partners in a trade regime to enjoy free access to markets and market information. It also prevents companies from distorting markets via government monopoly or oligopoly power. In addition, there is a free movement of human resources and capital between and inside countries operating under a free trade agreement.
On the other hand, opponents of free trade emphasized that the highly developed western countries would benefit more than the less developed countries owing to their mighty purchasing power. That would give them an unfair upper hand in trade negotiations. For instance, Quiggins argues that, as early as the mid-nineteenth century, leading critics of capitalism Marx and Engels had already foreseen the emergence of an international economy dominated by Europe (150). In addition, critics of free trade argue that it impedes an economy’s need to build up significant industries, as well as, the use of the most favorable tariff to advance an economy’s terms of trade by slowing down the consumption of imported products. Opponents also point out that free trade can hinder a country’s proper protection of industries that is fundamental to national security issues.
They also argue that a country risks facing problems in its wish to shield itself from price fluctuations by guaranteeing a secure national food supply through protection. In addition, a country would be faced with challenges in its efforts to put up barriers in industries where such barriers are present in foreign countries in its attempt to force other countries to liberalize trade in all of its sectors. However, despite spirited opposition from those who were suspicious of the Western ideas of free trade, because it is an idea whose time has come it has gradually taken root in international trade. The United States of America is considerably an open economy. She is a member of the World Trade Organization (WTO) and various regional open trade regimes such as the North American Free Trade Agreement (NAFTA) and the Canada-United States Free Trade Agreement (FTA). Under the FTA, the US and Canada, which are the world’s two biggest trading partners, aim to establish an increasingly free economic zone for trade-in products and services (Schott Para.1). She is a pioneer of trade liberalization. However, in the recent past, Americans have become increasingly concerned about free trade.
Different subject positions on free trade
Players in different industries have blamed free trade for the current poor performance of the US national economy. Opponents of free trade argue that trade creates and at the same time destroys employment opportunities. For instance, critics of free trade assert that even though a rise in U.S exports is bound to create jobs, the resultant increase in imports reduces employment opportunities because imported goods displace goods that would have been made in the United States by national workers (Scott Para. 3). In other words, opponents of free trade agreements contend that supporters of free trade pacts base their arguments exclusively on the positive impacts of exports while ignoring the adverse effects of imports on not only jobs but also the US trade balance (Scott Para. 6). Scott has likened this counting of only advantages of exports only to balancing a checkbook by considering only deposits without counting withdrawals.
Players from various industries and anti-free trade scholars have also blamed free trade for growing the United States’ global trade deficits. For example, Scott opines that trade deficits experienced by the United States for about three decades increased rapidly after NAFTA came into operation on 1 January 1194 (Para. 11). There was a 195.3% growth in imports compared to 136.2% growth of exports to NAFTA partners like Canada and Mexico. Even though there is no doubt that free trade increases exports, American public opinion is largely critical of free trade, as well as, environmental and labor groups. For instance, pressure from these groups forced President George Bush to enforce higher tariffs on imported steel getting into the United States (Wilson 346). However, when European trade partners threatened to respond by imposing higher tariffs on certain American goods, Bush backed down and changed the tariff increases at the expense of the steel industry, which must compete with other more efficient players.
Public opinion on free trade agreements
Even though Americans were avid supporters of free trade initially, there is increased suspicion about the effects of trade agreements such as NAFTA and resolutions of the World Trade Organization. According to surveys conducted by Pew Research Centre for the People and the Press, only 35 % think that free trade pacts have been for their country while 44% believe that free trade agreements have had adverse effects on the United States’ economy (Para. 4). Much more Americans, if recent surveys are anything to go by, believe that free trade has adverse impacts on employment opportunities in the US’ salaries and wages for American workers and general national economic growth. For example, 46% the Americans say that their finances have been negatively affected by free trade agreements. More than half of the Americans blame free trade agreements for job losses in the United States while 45% see these agreements as the major contributor to lower wages (Pew Research Centre Para. 11). However, the US public has two different opinions about trade with other countries. For example, most Americans believe that increased trade with European Union countries, Japan, and Canada would be beneficial for the US (Pew Research Centre Para. 1). However, there are mixed reactions concerning increased trade with countries such as China and South Korea.
Trade between countries both rich and poor is increasingly globalized. As such, the most fundamental question of how countries should trade fairly is and has been, a thorny issue since the time of the Cold War. Even though free trade has numerous benefits, it certainly tends to have negative impacts on a country’s jobs, workers’ wages, and general economic growth. These negative impacts of free trade have culminated into increased skepticism towards free trade agreements among most Americans who were initially supporters of liberalized trade.
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Pew Research Centre. Americans Are of Two Minds on Trade: More Trade, Mostly Good; Free Trade Pacts, Not So, 2010. Web.
Quiggin, John. Interpreting Globalization: Neoliberal and Internationalist Views of Changing Patterns of Global Trade and Financial Systems. United Nations Research Institute for Social Development, 2005. Print.
Rogowsky, Robert. Trade liberalization: fears and facts. New York: Greenwood Publishing Group, 2001. Print.
Schott, Jeffrey. The Canada-United States Free Trade Agreement: the global impact. New York, NY: IRPP, 1988. Print.
Scott, Robert. “The high price of ‘free’ trade.” Economic Policy Institute, 2003. Web.
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Wilson, James. American Government. New York, NY: Cengage Learning, 2008. Print.