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Selling to U.S. Free Trade Agreement (FTA) partner countries can help your business more easily enter the global marketplace and compete by reducing trade barriers. U.S. free trade agreements address a variety of foreign government activities that impact your business: reducing tariffs, strengthening intellectual property protections, increasing the contribution of U.S. exporters to the development of product standards for FTA partner countries, treating U.S. investors fairly, and improving foreign government procurement opportunities, and U.S. service companies. Some countries, such as Britain in the nineteenth century and Chile and China in recent decades, have made unilateral tariff reductions – reductions made independently and without consideration from other countries. The advantage of unilateral free trade is that a country can immediately reap the benefits of free trade.
Countries that dismantle trade barriers themselves do not have to postpone their reforms while trying to convince other countries to do the same. The benefits of such trade liberalization are considerable: several studies have shown that incomes rise faster in countries open to international trade than in countries more closed to trade. Dramatic examples of this phenomenon are China`s rapid growth after 1978 and India`s growth after 1991, the data that indicate when major trade reforms took place. Look at the list of FTA countries and preferential treatment requirements, and even worse, really pressing economic challenges lie ahead that smart international agreements could help solve. For example, we could harmonize international taxes on businesses and strengthen law enforcement in all countries to solve the problem of tax havens. And we could take steps to prevent countries from managing their exchange rates to gain a competitive advantage – a practice that has increased the U.S. trade deficit in recent decades. And we could take a harmonized approach to carbon pricing to make global climate change mitigation more effective. The Trade Facilitation Support Program (TFSP), which includes support from a tripartite trust fund led by the IFC, has received support from nine development partners – Australia, Canada, the EU, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom and the United States – for a total of $35 million. While free trade offers general benefits, the removal of a barrier to trade for a particular good harms the shareholders and employees of the domestic industry that produces that good.
Some of the groups affected by foreign competition have sufficient political power to obtain protection against imports. Therefore, despite their considerable economic costs, barriers to trade remain. According to the U.S. International Trade Commission, for example, U.S. profits from the lifting of trade restrictions on textiles and clothing would have been nearly twelve billion dollars in 2002 alone. This is a net economic gain after deduction of losses for businesses and employees in domestic industry. Nevertheless, domestic textile producers managed to convince Congress to maintain strict import restrictions. There is ample evidence that more outward-looking countries tend to grow faster than country-oriented countries,2 which are inward-looking.2 Indeed, one of the results is that the benefits of trade liberalization can outweigh the costs by more than a factor of 10.3 Countries that have opened up their economies in recent years, including India, Vietnam and Uganda. experienced faster growth and greater poverty reduction.4 On average, developing countries that significantly reduced tariffs in the 1980s grew faster in the 1990s than those that did not.5 Opening up their economies to the global economy was crucial to enabling many developing countries to gain competitive advantages in manufacturing some produce. In these countries, which the World Bank calls “new globalizers,” the number of people living in absolute poverty fell by more than 120 million (14 percent) between 1993 and 1998.1 Free trade is the simplest of the two theories. This approach is sometimes referred to as laissez-faire economics.
With a laissez-faire approach, there are no trade restrictions. The main idea is that the factors of supply and demand operating on a global scale guarantee the efficiency of production. Therefore, nothing should be done to protect or promote trade and growth, as market forces will do so automatically. The increase in trade also has distributive consequences. While economies as a whole benefit enormously from increased trade as competition intensifies and many good jobs are created in export sectors, workers` wages in import-competing industries may suffer or some workers may lose their jobs. .
