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; April 2007; May 2007


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Saturday, May 5, 2007

Free Trade Agreements (FTAs) can help your company to enter and compete more easily in the global marketplace. Trade agreements help level the international playing field and encourage foreign governments to adopt open and transparent rulemaking procedures, as well as non-discriminatory laws and regulations. FTAs help strengthen business climates by eliminating or reducing tariff rates, improving intellectual property regulations, opening government procurement opportunities, easing investment rules, and much more.
International trade is an integral part of the U.S. economy, accounting for more than one-quarter of U.S. gross domestic product and supporting more than 12 million U.S. jobs, including 1 in 5 manufacturing positions. FTAs can be a catalyst for accelerating economic growth by allowing greater competition, encouraging the formation of international partnerships, and by greatly liberalizing many industries. Most FTAs include specific obligations in the areas of intellectual property, services, investment, and telecommunications. Many FTAs also provide for groundbreaking cooperation in promoting labor rights and the environment.
On April 1, 2007, the United States Government concluded an historic free trade agreement with the Republic of Korea. This FTA will eliminate tariffs and other barriers to U.S. goods and services as well as promote economic growth and strengthen economic ties between the two countries.



Doesn’t the article seem to say it all? Free trade agreements are believed to be highly useful and beneficial to all countries who sign these agreements. Not only do they increase the income of the country, and therefore the country has more money to spend on developing itself, but they also help to strengthen ties between nations.

Firstly, doesn’t it seem a little too good to be true? Like all other treaties, free trade agreements have to have a downside. For example, is the strengthening of ties between nations necessarily good? Generally, yes, of course they are. However, how easily can a country manipulate this trust? If one country becomes too dependent on another, how simple would it be to just take over the entire economy of the country? Naturally, it is expected that countries are cautious when it comes to agreements and make sure to have a back-up plan in case the agreement fails. However, as proven by history it does not always succeed. An example of a case where a country has been backstabbed to a certain extent is what happened in 1946 in Europe to the USA. The USA believed that the Russians would keep to the agreement they had made earlier about how Germany was to be run once Hitler was overthrown. However, when Stalin took over Germany he did not allow the Germans to set up their own government under his control. Instead he became a second dictator, running Germany by his governing system in the Soviet Union, communism. While this example is not exactly one similar to free trade agreements, the main point that it is bringing across is that countries can be fooled.

This article gives concrete examples of how the US has benefited from these agreements. However, is it not likely that whoever signed the treaty did not benefit as much as the USA? Celine Charveriat, head of Oxfam’s Make Trade Fair Campaign stated that:

“Trade is important for growth but these agreements are bad for development. They require enormous irreversible concessions from developing countries and almost nothing in return from rich countries. These deals (free trade agreements) demand much faster liberalisation and stricter intellectual property rules than the WTO. They strip developing countries of the right to govern their economies and threaten their abilities to protect their poorest people and lift them out of poverty”

Further examples given of how free trade agreements can harm countries are the following:

1) Investment rules in free trade agreements and bilateral investment treaties deny governments the right to protect workers, the environment and the economy, and can expose them to compensation claims that reach billions

2)Stricter intellectual property provisions threaten to deny poor people access to affordable medicines, undermine traditional farming methods, and remove rights to traditional knowledge

3) Harsh tariff liberalisation threatens farmers’ livelihoods and will impede future economic development
4) The web of different agreements undermines multilateralism and diverts trade

The implications for development are significant. In the first ten years after the NAFTA agreement, Mexico lost 1.3 million agricultural jobs. Manufacturing jobs were initially created but competition from cheap labour in China led to 200,000 job losses between 2001-4 as firms relocated. In Peru, up to 900,000 people could be left without access to medicines if the US-Peru trade agreement goes ahead.

For the full article: http://www.oxfam.org/en/news/2007/pr070321_free_trade_agreements


Notice that the examples given are all developing countries. Yet the example given in the first article is the USA, which is a developed country. This proves that it is mostly developed countries which benefit the most from free trade agreements. As mentioned by Celine Charveriat, developed countries hardly lose anything during free trade agreements, while developing countries seem to lose more. However, having free trade agreements is the best way to build up an economy fast, though initially the people might suffer. Take China for example. 200 000 people lost their jobs between 2001-2004. Yet it must be taken into account that China’s population during that period was approximately 1292.2 million people. Comparatively, 200 000 jobs are not that much. And it is evident that China’s economy has improved greatly over the last few years. Whether this is due to free trade agreements is not entirely clear, however it seems to be that they played a role in the advancement of China’s economy, whether significant or not.

Therefore free trade agreements have both positive and negative sides. It depends on what kind of condition the country is in. If a major problem is unemployment or lack of social services or discontentment with the government, it would be foolish to sign free trade agreements. On the other hand, gaining a stronger economy is important for developing countries, or they will not have the capital required to improve overall conditions in the country. Yet free trade agreements should be treated with utmost caution.

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