Winners and Losers in the Arguments for Free Trade - Essay Example

? Winners and Losers in the Argument for Free Trade WINNERS AND LOSERS IN THE ARGUMENT FOR FREE TRADE Free trade can be defined asthe ability of most countries to either export or import without any regulatory or government restraints. Economists posit the fact that free trade leads to the increase of trade and productivity among countries via decreasing various barriers to trade. This surge in the flow of services and goods will undoubtedly increase competition that, in turn, will lead to a decrease in the price that consumers have to pay for goods to the traders. When these elements are all combined, most economists are of the belief that global and individual economic growth will be achieved. The comparative advantage theory states that every country will produce goods at which they are extra efficient at production. So long as each country is able to produce goods that give it more comparative advantage, trade becomes mutually beneficial. One argument for free trade is specialization. Through exporting and importing goods, nations come to rely on each other for the production of services and goods at which it might not be too efficient at doing itself (Voituriez and Ekins, 2009, p. 11). When producers and countries are allowed to specialize in production of various services and goods, they attain more efficiency in service and goods production. It also lets individual countries produce services and goods for some things that they may have not been in a point to back when they had to produce everything they needed themselves. Specialization also allows countries, which had to provide services and goods for themselves when they were still not available via trade, to carry out other tasks. Yet another argument for free trade is efficiency. Free trade enhances a country’s efficiency, which, in turn, leads to an increase in the number of services and goods that country or individual can produce using the same resources (Voituriez and Ekins, 2009, p. 11). This encourages corporations to look for other ways of decreasing wasted resources that, in turn, decrease the production costs of goods. Various firms may also seek to increase their production because of the increased demand that will inevitably rise due to the existence of free trade. This will happen when they realize that it is possible to produce extra units at a per unit price that is decreased. One more argument for free trade is an increased standard of living for the involved parties. Increased specialization and efficiency allow these parties to attain a higher living standard. As more services and goods are purchased and sold via exportation and importation, the amount of cash resources that are available in these nations can only increase. With individuals making more cash, they possess more money that they can spend on services and goods that they could use to import services and goods that can satisfy their other needs (Voituriez and Ekins, 2009, p. 12). Finally, free trade allows its participants to attain a better quality of life. Besides monetary gains to be gleaned by countries involved in free trade, economists use the argument that free trade highly improves the quality of life for its citizens. Free trade leads to the decrease in the possibility of war outbreaks, enhances the security of the nation, and leads to increased cultural enrichment and awareness (Voituriez and Ekins, 2009, p. 13). The belief is that these countries depending on each other for services and goods are not likely to go to war with each other. Additionally, it is likely that they will rely on each other’s defense when a situation pops off. This idea of free trade also exposes individuals to various cultures that exist around the world that result in their personal enrichment. Winners in Free Trade The biggest winners in free trade agreements are transnational corporations. Free trade agreements erase tariffs, meaning that corporations pay less for them to sell their products. With reduced tariffs, for example, electronic producers can maintain a consistent price to consumers and still maintain their bottom line (Voituriez and Ekins, 2009, p. 45). Corporation profits do not translate into increased tax revenues for the governments involved because these corporations transfer money from a country to the next, playing on currency fluctuation. Most corporations also use countries that act as tax havens that avoid taxation. Another winner from free trade are the big box retailers as free trade guarantees cheap goods are in steady supply (Voituriez and Ekins, 2009, p. 45). By lowering prices of some products by worker lay-offs and benefits slashing, they can attract clients. The tax incentives from these free trade agreements, coupled with decreased restrictions, make these retailers destroy small business that is in direct competition. Yet another winner from the free trade agreements are market speculators, who benefit via the elimination of environmental and financial regulations for various international investors. Given the fewer strings attached, coupled with minimal accountability, investors can get away with financial impropriety (Voituriez and Ekins, 2009, p. 46). With the nature of free trade agreements, mining companies can carry out predatory, or exploratory, mining with minimal accountability. Free trade agreements, with the recent financial crisis, will mostly benefit speculators looking for investments in developing countries. Free Trade Losers Casual workers in developing countries have the most to lose with the implementation of free trade agreements. As multi-national companies relocate to countries with a greater abundance of cheap labor, they look to reduce the wages, causing the workers to receive low pay. While this was not the agenda when making the agreements, they create an avenue for the exploitation of workers who earn the minimum wage in developing nations. Additionally, this causes a growth in unemployment, in the developed nations (Voituriez and Ekins, 2009, p. 48). Farmers in developing countries are another loser in free trade agreements. The industrial agriculture model has caused farmers to depend increasingly on transnational agri-business to purchase seeds as well as agro-chemicals (Voituriez and Ekins, 2009, p. 48). While corporations controlling the processing and distribution of products make profits, the farmers barely break even. The tendencies of having people farming, or few farmers, and larger agri-business conglomerate have pushed down the farmer’s profits. This has led to most farmers leaving farming altogether, which creates unemployment in agri-business for developing countries. Most developing nations that have limited control of their patents and resources have the least to gain for the advent of free trade agreements. These countries miss their resources and on jobs, which are transferred to countries that have specialized in this sort of trade (Voituriez and Ekins, 2009, p. 49). Most transnational companies who take advantage of free trade agreements do so in order to get cheap labor as well as cheap and exploitable resources. Accessing these resources and more supply of the former mean that water and land policies to enable them to control the resources must be changed to their benefit, causing the displacement of indigenous communities. The displaced people are then turned into minimum-wage labor. Reduced regulations and increased tax incentives for transnational corporations leave developing countries exposed to exploitation by powerful companies and speculative investors. References Voituriez, T. and Ekins, P., 2009. Trade, globalization and sustainability impact assessment: a critical look at methods and outcomes. Sterling: Earthscan . Read More