The Myths Around Free Trade Agreements

America`s trade deficit increases when non-Americans choose to increase the amount they invest in the United States. Dollars leaving the United States as part of the trade deficit must return as a “capital surplus” – that is, the net investment funds that go to the United States. More investment means more expanding businesses, more new businesses, higher labour productivity and more production promotion activities, such as research and development, all of which increase prosperity. The so-called “monetary manipulation” of a trading partner does not harm the U.S. economy. For example, a drop in the price of yuan makes Chinese products cheaper for American consumers, which gives the U.S. a real advantage. However, if the price of the yuan remains low through monetary policy, the real costs of resources and production exported by the Chinese population, which are also facing rising prices for US imports, will not be reduced. An undervalued yuan – provided this undervaluation is real and not fanciful – benefits the Americans at the expense of the Chinese. India`s decision not to join the Regional Comprehensive Economic Partnership (RCEP) has led to an avalanche of writings, editorials and interviews. Most of them discussed the impact of the decision on four themes: exports, investment, integration into the global value chain (GVC) and domestic industry. Let us use another source of information – the experience of countries with free trade agreements (FAs). To get the free app, enter your mobile phone number.

Although the United States has traditionally played a leading role in multilateral trade negotiations, this has been sorely lacking in reviving the troubled Doha round of negotiations. The European Union, Japan, China and India sign bilateral agreements and participate in multinational regional initiatives. The United States was actively involved in the negotiation of bilateral agreements, but the three agreements reached by the Bush administration until mid-2007 were not ratified until the end of 2011. The growing rhetoric on the imposition of tariffs and the restriction of international trade freedom reflects a resurgence of old arguments, which remain largely alive, because the benefits of international free trade are often diffuse and difficult to discern, while the benefits of protecting certain groups from foreign competition are often immediate and visible. This illusion feeds the general perception that free trade harms the U.S. economy. It also tilts the balance in favour of special interests seeking refuge from foreign competition. As a result, the federal government is currently imposing thousands of tariffs, quotas and other trade barriers. Paralyzed by these myths, America has achieved only modest gains in trade policy since 2007. This is unfortunate, because an active trade policy could improve the standard of living of Americans and facilitate a return to growth.