International Agencies and Policies
International agencies and policies play a vital role in promoting free trade which has both advantages and disadvantages to the economic growth and development in America. It’s true that this international agencies and policies that promote free trade are good for economic growth and development in America since free trade is beneficial to the investors and exporters this because it makes it easier and cheaper for American companies to export their products and services to its trading partner’s markets.
Free trade enables American exporters and investors to practice their rights in relation to participation in the development of product standards as well as the compensation of its investments in the partner country. For instance, American exporters gain from Free Trade in that this trade facilitates competitive advantage of the Americas products and services against those of its partners. As a result, America enjoys the freedom of exporting more of its products than it imports from its partner countries which help in improving its Gross Domestic Product and the economy in general (Schott, 2004).
In addition, free trade is beneficial to consumers since it provides to them a wide variety of goods and services which may not be produced in their country but exist in other countries. For example if U.S does not produce wheat and its partner in the free trade produces this good then its consumers who have desire for the product benefits a lot. In addition, this sources of goods provided in the free trade may, act as incentives to American-based producers to keep their costs and prices for their products down in order to cope with the trade (Chao, 2001).
Contrary, international agencies and policies that promote free trade are not good for economic growth and development in America because free trade to some extend leads to a net loss to America because it causes unemployment. Free trade put pressure on the cost of production leading to their increase. As a result, the subsistence wages paid to workers lowers thus rendering many of them jobless. Many American industries lay down workers through retrenchments as a way to suppress the increasing cost of production. This is a clear indication that many American industries are unable to compete with other foreign based industries. An outstanding example is the free trade which existed between U.S and Canada in the 1990.
There was a sharp increase in the value of the American dollar relative to that of Canadian dollar. As a result, American locally manufactured goods became more expensive for Canadian to buy with those of Canada being cheaper for the Americans. This led to a net loss to America since it encouraged importation of products from Canada and discouraged America from exporting its products. This further led to rapid increase in the cost of production which further increased the levels of unemployment in the country (Grossman & Helpman, 1995 p668).
In conclusion, from the above arguments it’s true that international agencies and policies that promote free trade are not good for economic growth and development in America. This is because they bring many benefits which are attached to economic growth and development. However, this agencies and policies may have far many effects to the economy especially in raising the cost of production which further leads to loss of job and high standards of living.
Chao, Y. (2001). International and comparative competition laws and policies. The Hague: Kluwer Law International.
Grossman, G., & Helpman, E. (1995). The Politics of Free-Trade Agreements. The American
Economic Review, 85(4), 667-690. Schott, J. J. (2004). Free trade agreements: US strategies and priorities. Washington, DC:
Institute for International Economics.