Negative Impact of Free Trade on an Economy - Research Paper Example

Reasons Why Free Trade Has a Negative Impact on a Countrys Economy When the United s agreed to join the ranks of the Free Trade nations, it didso with the high hopes of being able to freely exchange intellectual copyrights,exchanging goods with other nations, lowering tariffs, lowering the cost of manufacture for in demand goods, and being able to sell these items on the open market at reasonable and affordable prices. Sadly, their effort to make the country open to goods from other countries and the desire to lower tariffs on items sold by America in the market of other nations backfired big time on the U.S. economy. Rather than raising the standards of international manufacture and creating a most conducive international business market, the cheap products that flooded the market were of inferior quality and did nothing to help ease the high tariffs that was pegged onto U.S. goods by the other nations in the free trade zone. In effect, by opening up America to goods from other nations, most of which are imitation items that pass themselves off as Class A goods, the political and economic leaders of the country themselves helped crash the American economy. There are a number of reasons as to why the citizens of America may wish to buy foreign made goods. It could be that there is a demand for the item which is not manufactured in America. Or maybe the item cost is much lower if they purchase one that is not American made. Whatever the reason, a market exists for Americans who prefer to buy foreign made goods. Although there is a sound principle involved in people purchasing foreign made items, the only person who benefits from this set up is the domestic importer. Since he imported the goods, he makes the income on the sales of the items. Needless to say, for every business sector that benefits from a particular selling arrangement, there is a sector that will end up with the bum end of the stick. In this case, the domestic importer makes a killing while the domestic manufacturer ends up holding his bag of goods because nobody will buy it due to its higher selling price. (MacDonald, Brad “International Trade: Commerce Among Nations”) Even worse, by not purchasing American made products, the Americans themselves end up being the harbingers of economic hardship among themselves and their country. The reason that the American economy has managed to survive all the years prior to the advent of free trade was really quite simple. The money was spent within American shores and thus helped move the economy along through taxes collected and the salary of the people working in the field of manufacture. The demand for goods and services actually spurred the economy by creating jobs and balancing both the local and national government budgets. But the U.S. is currently experiencing a massive trade imbalance that has resulted in a lop sided economy and has forced America to compete in a massive free trade scale. The competition is heating up and it seems like the United States is not equipped to compete at such a level. The country fails to compete because Americans have lost sight of what is truly important in a global economy, the survival of ones own economy. Instead, American corporations have resorted to off shore manufacturing in an effort to compete in the free trade market. Sadly, a U.S. brand not made in the United States is a totally different item or level of service when compared with a U.S. brand created and maintained within the borders of the United States. American workers are considered a liability in todays free-trade market because of the high cost of labor that they demand. It is because of these over pampered work force that factories and support systems have been moved to countries where people can manage to survive on a dollar a day. It is more appealing to the owners of companies to pay slave labor wages rather than give in to the exorbitant cost of manufacturing goods and creating support systems for their company within the United States. (Snyder, Michael “55 Reasons Why You Should Buy Products That are Made in America This Holiday Season”) As a result, Americans have lost their source of livelihood and lessened their economic power in terms of their ability to purchase goods. Indeed, the products that have recently flooded our markets from countries like China are quite affordable and good enough when one thinks of the planned obsolescence that is built into the products anyway. But what good is having these affordable items on our American store shelves is nobody is capable of purchasing them? In order to understand the grave impact that the free trade participation of the United States has on its local economy, one needs to only listen to the logical explanation being shared by Michael Snyder (“ 55 Reasons Wy You Should But Products That are Made in America This Holiday Season”) : Last year, the United States had a trade deficit with the rest of the world of 558 billion dollars.  More than half a trillion dollars that could have gone into the pockets of U.S. workers and U.S. businesses went overseas instead. If that money had stayed in the country, taxes would have been paid on that mountain of cash and our local, state and federal government debt problems would not be as severe. As a result of our massive trade imbalance, we have lost tens of thousands of businesses, millions of jobs and trillions of dollars of national wealth. Both major political parties have sold us out on these issues, and we are getting poorer as a nation with each passing day. We desperately need a resurgence of economic patriotism in the United States before it is too late. The middle class sector of American society does not seem to understand that it is their purchasing power that is adversely affected by this turn of economic events. It is the middle class worker who ends up complaining that his salary does not have the same purchasing power that it had before. His salary remains the same as the price of basic commodities and goods seem to be on the upswing. However, he still insists on buying these latest trends at the risk of running up their credit card debt to unmangeable proportions. As they continue to charge their inferiorly made items to their credit cards, they do not realize that their very jobs are at stake with every purchase of foreing made items. Dudley (qtd. in Ramos) has reasoned that this mind set has given rise to a very important problem that Americans seem to be oblivious to. He points out that: "...the number of manufacturing jobs lost soared past 850,000 in 1988" (408). Occurrences like this are due to the deindustrialization, this is when the U.S. government allows American corporations to move good jobs out of the country. Basically this means there is a wide spread shift in what companies are investing in. ... "Over 1,800 manufacturing plants in Mexico"(407). The main goal these U.S corporations increase profits. The American economy is being sold out by global corporations that only see their greedy bottomline at the end of every business deal. Profits are made by making the U.S. dollar weak, causing a fluctuating currency rate that benefits them in terms of importing raw materials, inexpensive labor, and then selling the goods in overseas markets. All while taking jobs away from hard working Americans. (qtd. in Ramos) According to the World Bank, international trade was meant to become a more effective way of reducing poverty in a nation. That leads one to wonder as to where the United States went wrong in their participation in the program. The economy of the United States is most certainly not benefitting from international trade. Instead of creating a country that is self-sufficient and able to function within the balance of the international trade system, the United States has ended up being the biggest offshoring manufacturer with one of the most unstable and non-investment inducing economies in the world. (The World Bank Group “Trade”). Due to the membership of the United States in the free trade market, the country has become prone to economic instability. It has lost its edge in the international market by removing the exclusivity of its high quality products through the licensing of their trade and brand name to foreign manufacturers who can produce the same goods at a fraction of the cost. Provided one does not tend to scrutinize product quality too much. Let us remember that these foreign made products are most often manufactured under slave labor conditions. Americans have always been sticklers for fair labor practices. Therefore, we should buy American made goods in order to end the slave labor practice of overseas countries where unsafe working conditions and child labor as a norm rather than an excption. More importantly, these jobs that ship overseas will never again come back to the United States, thus robbing Americans of jobs in their own country. American economic needs should never outweigh the business earning targets of American owned and controlled corporations. (Randy, “Top Ten Reasons to Buy American Made Products”) American manufacturing standards have begun to deteriorate as the goods manufactured in the United States have needed to struggle with the cost of rising imports and emmployee wage demands. As such, our country is fast becoming dependent on other nations to supply us with our much needed goods. Although America is not a colony of any nation, our markets and economic stability now hinges on our dependence on the free trade market. America has been robbed of its proud heritage as a trend setting and enviable nation on the world stage. No longer is America independent of other nations. Now America relies on other nations in order to keep it in existence. The offshoring of jobs meant for Americans has resulted in the lowering of American wages at a time when the citizens of this once great nation need their purchasing power to go up. The difficulty of retaining a job and even simply finding a job in todays market has caused the ordinary American laborer to accept the equivalent of slave labor wages in his home country. Yet Americans, who desperately need the jobs accept such unfair labor offers these days because they need the job. Indeed, the motto of the average American these days seems to be “better a job with some income than no job and no income”. Free trade has brought America to its knees and our politicians are allowing these corporations to continue killing our economy for personal gain and profit. The major U.S. economy profits suffer because of the loss of American jobs and unfair labor practices within the country itself. A bleeding economy does not serve its citizens properly. Job losses mean that the purchasing power of Americans decreases on a massive scale and the middle class are forced to redefine their economic existence. For the American corporations that cannot afford to move their base of operations overseas, these problems can pile up and result in the bankruptcy of the corporation. Once that happens, it is not uncommon for the company closure to have long term effects on the economy of the United States that results in public deprivation and mass poverty. (Ramos, Laura “American Made Products and / or Services Made in the U.S.A.”) America is fast becoming a deinstrualized country and that is what is causing its rapid downfall. By allowing our businesses to take their business overseas and patronizing these non-USA made products, we are hurting ourselves. In order to help the American economy recover, one must purchase from within his own borders. It is only by keeping the American dollars within the coffers of our own U.S. based businesses that we will manage to recover from this triple depression slump that we find our country having a hard time recovering from. It can be done. Works Cited Douglas, Susan & Nijessen, Edwin. “Attitudes Toward the Purchase of Foreign Products: Extending the Model”. stern. nyu.edu. nyu.edu. May 1999. Web. 2 Apr. 2013. MacDonald, Brad. “International Trade: Commerce Among Nations”. Finance and Development. imf.org. 28 mar. 2012. Web. 1 Apr. 2013. Ramos, Laura. “American Made Products and / or Services Made in the USA”. Why Buy American?. madeinusa.org. n.d. Web. 5 Apr. 2013. Snyder, Michael. “55 Reasons Why You Should Buy Products That are Made in America This Holiday Season”. The Daily Sheeple. thedailysheeple.com. 19th Nov. 2013. Web. 3 Apr. 2013. “Trade”. The World Bank. worldbank.org. 2013. Web. 4 Apr. 2013. Read More