Nafta

Discussion Question Week Six:

Part A: Free international trade enables all nations to gain from specialization and trade. To what degree can the United States save jobs, compensate for low foreign wages, compensation for costly environmental policies and protect developing nations from being exploited by restricting international trade? Use examples to illustrate a position.

Since the early 1900’s a new term has arisen: Globalization. With the increase in technology, and instant communication; business never stops. In short, because of this, we are able to constantly do business with foreign nations. I think foreign trade is a good thing. When reading about comparative and absolute advantage, it make sense that if a country can produce grain (for example) at a cheaper operating cost than the United States, it make sense for us to trade goods if our consumption is higher.

In regards to the United States saving jobs, that’s a tough one. Some companies (Apple, Inc. for example) outsource their labor to China because the cost for labor is cheaper – not because there aren’t skilled workers in the United States. Another reason, taxes are much cheaper there. Normally, if companies make profits overseas, they only have to pay U.S. taxes if they funnel that money back to their headquarters in the U.S. If their manufacturing plant is located overseas, a lot of money remains in the foreign market.

One good move was the formation of NAFTA in 1993. Between Canada and Mexico, tariffs where phased out. One example is impediments to trade and investment were eliminated which allows the US to supply Mexico with more US goods and to boost US jobs. If other countries joined in on NAFTA, this is possibly one solution to saving jobs and compensation of low foreign wages.