International Trade and Free Trade Essay

Submitted By Jacob-Van Laere
Words: 1510
Pages: 7

Trade Today:
Weighing the Benefits and Consequences of Free Trade Practices Trade amongst human beings has been a basic function of life and community since 30,000BC and still today turns the economic gears that drive the development of all nations in the world (Bernstein, 2008). Human trade practices throughout time have created large divisions of specialized labor producing commodities ranging from textiles to precious metals that are traded with neighboring and distant nations. This process of the exchange of goods has had many beneficial effects on human society and has become what some may argue to be the driving force behind modern day advances of developed and un-developed nations alike. These advances however do not come without a price. The continued demand and exploitation of trading commodities between nations has brought forth countless treaties and legislation that have raised questions about environmental sustainability as it relates to trade. In this paper I will discuss some of the benefits and consequences of current trade practices, the legislation that governs them and the future that lies ahead. Trade throughout time has seen countless changes in policy and regulation that have governed the practice and helped shape current trading practices into what they are today. With nations across the globe limited to the amount of commodities they can produce or extract from within their borders, many rely heavily upon imported goods from various nations to sustain everyday life of its residents. This trade is regulated on a nation by nation basis through acts of legislation as well as organizations such as the World Trade Organization (WTO) which oversees global international trade and works to create a regulatory framework to help producers of goods and services conduct their business fairly (Organization, 2014). A large majority of actively trading nations have signed WTO agreements that have been passed as law within the countries governmental system. These agreements are aimed at many aspects of fair trade but have a heavy focus on lowering tariffs and financial trade barriers set by certain nations. The goal of eliminating tariffs and barriers placed on exported and imported goods from a nation results in what is commonly referred to as free trade (Krugman, 1987). Free trade promotes many features that drastically impact a nation’s economy through increasing demand for specialized workforce’s, fostering competition and innovation as well as creating a professional law and policy driven international trading system. Although free trade is not universally upheld in many nations, the WTO works to lower tariff and trade barriers in all nations that have signed WTO agreements. In the United States of America, beneficial financial factors can be seen in many aspects of a nation’s growing economy through fiscal analysis. The U.S. Census Bureau reports that in 2013, goods and services exported from the U.S. created and supported 11.4 million jobs in industries such as agriculture, apparel/textiles, precious metals and technology. The United States gross domestic product in 2013 was 15684.8 billion, with exported goods accounting for over 13.5% of that (Commerce, 2014). With numbers such as these, it is hard if not impossible for congress and NGO’s to create legislation that would cause detriment to this. Legislation that can “harm” the economic benefits of free trade involves placing taxes and tariffs on both exported and imported goods. These tariffs or trade barriers are often seen as beneficial for the nation producing the commodity while harming the importer or receiver of goods. Trade barriers are also frowned upon due to the ability for a nation to selectively and discriminately tax specific nations higher or lower tariff rates on imports. To gain a better grasp on the pros and cons of free trade, it is helpful to view previously enacted legislation such as the North American Free Trade Agreement (NAFTA).