The article can best be summed up in one sentence "For supporters of trade liberalization and an open economy, this speech was alarming. The U.S. economy is much stronger when people can trade freely across borders."
Trade is extremely important to our economy! It is illogical to make everything on your own if you can trade with other countries that have a comparative advantage over you in producing particular goods.
Plenty of people can tell you trade is crucial for bustling economies but what is the significance of "free" trade? Free trade is the policy of treating foreign goods and services no differently than domestic goods and services. Economist Frédéric Bastiat explains free trade well in writing that "through this exchange, they (other countries) are compelled to let us share in advantages".
If we allow free trade to continue, it makes sense that other countries will do the same in return and neither one of us will be hindered from the exchanging of goods.
Most free trade is a foundation we clearly need in order for our capitalistic economy to thrive. After all, The United States is the world's number one consumer and second largest exporter.
The concern of those in support of the liberalization of free trade is the rhetoric that Trump is a protectionist, meaning he will discriminate against foreign goods and services.
How is it that Trump, the executive of over 500 successful companies appears to oppose free trade? Is he not the very picture of capitalism? If so, why does he propose a plan that will obstruct it? The truth is there is more to Trump's plan than meets the eye.
NAFTA is described by Trump as a horrible trade deal because it unfairly favors Mexico. Not only does NAFTA eliminate 50% of Mexico's trade tariffs, it also allows Mexico to not abide by America's safety legislation. This is when the deal becomes unfair to the United States.
The problem with Mexico not having to follow our legislation rules is it puts the U.S. at a comparative disadvantage in trade.
For example, Ford is an American company that is manufacturing cars in Mexico. If there is a bid between the U.S. and Mexico for who gets to export those cars Mexico will win the bid because they do not have to pay for the same safety precautions that Americans do.
As a result, instead of manufacturing in America, our companies are moving their business to other countries because, by not following our safety rules, they can make more money. The problem is this leaves us with lower quality merchandise and less income for our economy.
Think of the situation as basketball. If the guest team does not have to follow all the rules the home team does (pretend they can double dribble), the guest has an unfair advantage and will beat the home team. This does not mean the guest is better, it means they are not playing by the rules they should.
Trump does not wish to put an end to free trade, however, he won't settle for the short end of the stick we are getting with these trade deals. His plan is to renegotiate NAFTA and abolish it only if necessary.
Concepts such as trade are more sophisticated than they appear on TV. Trump seems to be demonizing free trade while in reality, he wants to remove favoritism of other countries and make trade comparatively competitive.
NAFTA is described by Trump as a horrible trade deal because it unfairly favors Mexico. Not only does NAFTA eliminate 50% of Mexico's trade tariffs, it also allows Mexico to not abide by America's safety legislation. This is when the deal becomes unfair to the United States.
The problem with Mexico not having to follow our legislation rules is it puts the U.S. at a comparative disadvantage in trade.
For example, Ford is an American company that is manufacturing cars in Mexico. If there is a bid between the U.S. and Mexico for who gets to export those cars Mexico will win the bid because they do not have to pay for the same safety precautions that Americans do.
As a result, instead of manufacturing in America, our companies are moving their business to other countries because, by not following our safety rules, they can make more money. The problem is this leaves us with lower quality merchandise and less income for our economy.
Think of the situation as basketball. If the guest team does not have to follow all the rules the home team does (pretend they can double dribble), the guest has an unfair advantage and will beat the home team. This does not mean the guest is better, it means they are not playing by the rules they should.
Trump does not wish to put an end to free trade, however, he won't settle for the short end of the stick we are getting with these trade deals. His plan is to renegotiate NAFTA and abolish it only if necessary.
Concepts such as trade are more sophisticated than they appear on TV. Trump seems to be demonizing free trade while in reality, he wants to remove favoritism of other countries and make trade comparatively competitive.
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