Why do presidents and Congresses enter America into Free Trade Area agreements? That is, why do these actors assume the net benefits of freer
Presidents and congresses enter America into Free Trade Agreements because these agreements help the U.S to reduce barriers to its exports and also protect its interests through enhancing the rule of law in the partner country. This implies that these agreements make it easier and cheaper for American companies to export their products and services to its trading partner’s markets. In addition, FTA enables security and enforcement of American owned intellectual property rights to its partner country (Schott, 2004). This is to say that FTA gives Americas products and services a competitive advantage over those of the other partner countries which help in boosting its economy. Q.2 - Why nations delegate away some of their sovereignty to international organizations in order to promote trade on the assumption that doing so helps their Economic Growth and Development.
Nations delegate away some of their sovereignty to international organizations to promote trade in order to satisfy their own interests. For instance, America delegates some of its sovereignty to international organization in order to have commanding power in decision making over the other countries. America gains voting power by submitting the World Trade organization and International Monetary Fund. This implies that it has more say in the making and the revision of rules in these organizations. Being the highest contributor of wealth to these organizations, America enjoys economic growth which further gives it a stand in the global economy control. On the other hand, Congress gets strengthened oversight on specific agreements which lead to durable procedural agreement with the president by granting Fast-track Authority. Furthermore, through granting this authority, the congress is able to control non-tariff agreements thus enhancing credibility of U.S negotiations (Cooper, 2003).
What does America gain by pursuing freer trade versus erecting higher tariffs or other import restrictions, both politically and economically?
Through Free trade, America is able to protect and enforce its own intellectual owned property rights to its partner country. Nevertheless, Free trade creates a path for America to practice the rule of Law in the partner country. Moreover, it enables America 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. All these factors combine to account t for the political gains that America enjoys for pursuing in Free Trade (Schott, 2004).
On the other hand, America gains from Free Trade economically 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. This is because it makes its currency value to depreciate relative to that of its partner country making its products and services more affordable than that of its partner country. For instance, the FTA between America and Canada of the year 1990 led to a sharp increase in the value of the Canadian dollar against the U.S dollar. As a result, Canadian locally manufactured goods became more expensive for Americans to buy with those of America being cheaper for the Canadians (Grossman & Helpman, 1995 p668).
In conclusion, America cannot do things without anticipating reactions from other nations. This is because it focuses on gaining from the negotiations both politically and economically to satisfy its interests without considering the effect of the same to its partner countries. To balance the demands of constituents and parties the policy makers advise countries to come up with adequate measures to protect their investments and labor force. In addition, they advise countries to enter into trade agreements which are free to enter and leave. This implies that if a country does not benefit from the trade agreements, then it can move freely without suffering any costs.
Cooper, W. H. (2003). Free trade agreements impact on U.S. trade and implications for U.S.
Trade policy. Washington, D.C.: Congressional Research Service, Library of Congress 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.