With globalization spreading rapidly across the planet, America needs to manage its own economy and protect its workers by eliminating free trade policies. Free trade policies are becoming synonymous with globalization as they accelerate change and increase mobility across borders. As border crossing loosens, American businesses relocate factories and outsource jobs to regions where labor is cheap. Consequently, domestic manufacturing jobs suffer as unemployment rises and wages drop for those previously employed in factories that moved abroad. The US government needs to recognize the detrimental social effects of free trade, reverse its attitudes, and implement the proper trade barriers, quotas, tariffs, and incentives in order to protect the working class.
Free trade hurts low waged America. With free trade, companies move their businesses to the regions with the fewest regulations. Economists call the flight of manufacturing plants a “Race to the Bottom.” In order to compete, companies move their operations to regions where they can produce goods at the absolute cheapest costs. Accordingly, companies flock to the nations where governing bodies offer incentives that ensure these cheapest costs. As countries compete for foreign businesses to bring new employment opportunities, governments try offering the cheapest conditions for factories to operate, and often cut back on workers rights to provide cheap labor. This undermines governments’ abilities to protect workers. Countries like the US have passed many regulations providing laborers with power, such as creating minimum wage laws and establishing rights to unionize. Free trade undermines the US’s intentions by allowing the free movement of goods. With free trade in place, the US leaves itself with two options: protecting workers rights or eliminating workers’ jobs. The US chooses to maintain its stance on workers rights, inevitably encouraging businesses, especially manufacturing plants, to flee from their domestic, American borders.
Countries’ competitive race for greater employment and creation of new jobs also forces wages to drop in an unregulated, free global market. The Economic Policy Institute estimates that new US jobs created to replace old outsourced jobs pay 21% less. Often times unionized industries see their manufacturing plants relocate. These workers then search for new jobs. But these new jobs lack the benefits of labor unions, which causes their incomes to fall. While policy makers boast that free trade lowers the costs of goods, the lower classes, who the “Race to the Bottom” affects most, have smaller wages. Therefore, cheap products do not necessarily translate to larger amounts of disposable income. Low waged Americans cannot allocate these minimal incomes to the purchase of larger quantities of goods as originally promised by the advent of free trade.
Proponents of free trade claim that eliminating restrictions to trade makes economies more efficient. Here, the proponents are one hundred percent correct. Free trade is efficient. But simply basing trade policy on efficiency ignores social and political factors. Efficiency only ensures the maximization of output per cost ratios. The term efficiency does not mean that people will be made better off or that more money will flow into an economy. In business, efficiency helps firms make the most money possible. But for governments who are not mandated to maintain profits and high share prices, ignoring social factors when implementing trade policies is irresponsible. Governments carelessly assume that the benefits big businesses receive from free trade will trickle down to laborers and increase society’s spending power. Contrary to the forecasted social benefits, when factories move abroad, America and its low waged manufacturers suffer.
When the North Atlantic Free Trade Agreement passed in 1994, Detroit’s auto industry moved its manufacturing plants to Mexico, where laborers do not require the same high wages as their American counterparts. During the period from 1994 through 2007 America’s manufacturing employment dropped by more than three and a half million and Detroit’s unemployment rate rose to 14.2%. Without pay checks, out-of-work laborers do not have larger amounts disposable income like theorists predicted as the outcome of free trade. Currently, one third of the city of Detroit lives in poverty. As governments side with big business and further implement free trade policies, the disparity between the rich and the poor continues to grow. The rich benefit from the profits of more efficient and cheaper means of production. At the same time, low waged Americans continue to lose their jobs at the expense of cheap laborers abroad. The disparity between rich and poor must be curtailed. The US government needs to withdraw from its free trade agreements, so that working class Americans can reestablish their union and wage rights without fear of outsourcing and loss of jobs. America must eliminate these trade policies by implements change through a series of trade barriers and incentives. The government has the responsibility to act in the interests of its working people before it places the fate of the entire economy on an ill-considered trade policy that favors big business.
Free Trade
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