The argument for free trade generally goes like this:
Open markets are good for developing nations because it opens up markets for their goods and create jobs in those countries. It lowers the cost for American businesses thereby making merchandise cheaper for the American people. The availability for cheaper merchandise is good for the American poor.
I can understand the principle of free trade but I wonder is it the Holy Grail of economics as many claim that it is. Ross Perot once said that the giant sucking sound that we would soon hear is jobs leaving this country if NAFTA passed. His company now outsources to India. The irony, huh? NAFTA did pass and supporters claimed that it would mean a standard of living increase for Mexicans and lower products here in the US.
So why are so many Mexicans still trying to cross the border to get to the US if the free trade zone produced more jobs in Mexico? My guess is that American companies don’t apply the same work environment and wages that they do to US employees. They simply do what the host country allows when it comes to work place safety, benefits and wages. Which isn't much.
The question I ask it this: Is the low cost of goods worth US jobs? The two don’t seem equivalent. Sure, free trade creates jobs here in the US, but is it a one-to-one ratio to the manufacturing jobs lost? America is still creating jobs but most of those jobs do not pay livable wages. What point is it to create a job that doesn’t adequately support an individual? There is also the argument that free trade opens markets for American goods. But what good is that if all of the American goods are manufactured in China?
Free trade may work well for developing countries, but when you looking down into the valley like the US is, it doesn’t seem to make much sense to participate. How do we compete with prison labor in China or slave labor in Mexico? The theory of free trade is that the world will reach an economic/standard of living equilibrium across the globe. That mean Americans will see their standard of living diminish and developing well see theirs increase. Again, that is not on a one-to-one ratio and Americans are losing faster than the rest of the world is gaining. So are cheap products worth lower wages and a lower standard of living? I don’t think it is. I don’t have any answers but I just think the free trade argument is something we should take more interest in understanding.
We are already to a point where pensions are a thing of the past and companies are losing ground because of the cost of healthcare coverage for workers. I also wonder if free trade is really raising the standard of living across the world. Mexico, with its corrupt system, is still a mess. China receives most of our manufacturing jobs and the disparity of the haves and have-nots in that country is increasing.
It seems to me that we are in a race to the bottom. Where $10 and $15 an hour jobs are the norm, pensions become extinct, healthcare coverage non-existent and the stagnant wages are just a fact of life. Certainly corporate profits will increase. The middle-class is already squeezed and free trade doesn’t provide much of a relief.
1. Do you believe free trade is good for American workers?
2. What industry is replacing our manufacturing base with equivalent wages?
3. Do you believe that free trade cost American standard of living?