Column: The complex ramifications of trade agreements

The abandoned Packard Plant in Detroit, Michigan in March 2014. (Moon Man Mike/Creative Commons)

On March 25, the CEO of FedEx, Frederick W. Smith, wrote an article for the Wall Street Journal detailing the recent history of trade focused from the perspective of the United States. He described the transition to freer trade markets and international trading. In fact, the title of this article is “How Trade Made America Great.”

Smith clearly articulated his support for a connected global economy with few trade regulations. This article displays Smith’s beliefs about the endless benefits of easy, fast and affordable global trade systems. However, this article fails to account for the complications of global trade. A more open trade system is great in theory, yet it fails to account for differences in manufacturing and labor laws.

Smith supports recent trade agreements, explaining them as a display of the commitment to “further global integration.” While this is true, these agreements are not necessarily beneficial to the U.S. economy as he claims this trade expansion is. Smith states that the North American Free Trade Agreement (NAFTA) was “clearly an economic success.”

Yet, there is plenty of evidence against this claim. Since NAFTA took effect, the state of Wisconsin has lost 68,000 manufacturing jobs, which was about one-seventh of the market. During this agreement, many operations were outsourced.

For example, Chrysler’s Kenosha Engine facility moved to Mexico. The trade agreement overall was detrimental for the U.S. job market. The Economic Policy Institute (EPI) estimates a loss of 682,900 jobs due to NAFTA, and that calculation is after accounting for the jobs created as a result of the agreement.

There is a new trade agreement on the horizon for the United States. The Trans-Pacific Partnership (TPP) is a trade agreement that is still under government review. The website of the Office of the United States Trade Representative claims that this agreement will help grow American exports, support American jobs and strengthen the middle class.

However, the EPI and many prominent economists, including David Autor, David Dorn and Gordon Hansen have analyzed the agreement and claim that the agreement will increase income inequality by helping corporations and those who have stocks in them. Another top economist, Joseph Stiglitz, predicts that the deal will not impact trade volumes very much, especially not in the United States or Canada because they mostly export capital intensive goods. 

There is one important inclusion in the TPP that was not included in any previous trade agreements. This agreement requires member parties to establish regulations concerning work conditions, which includes adopting minimum wages, health and safety protocols, and maximum hours of work.

Even though these requirements will not match those of the United States, this obligation sets precedence for future relations with other countries. This will not resolve wage gaps/differences, leaving an uneven playing field for manufacturing jobs in the United States, but the concept of requiring allies to establish these regulations is important for more than trade agreements.

Smith’s focus on the economy fails to recognize other ramifications of trade agreements. Previous trade agreements have led to law suits over fossil fuels, and the proposed TPP is no better. Under this agreement, it is likely that corporations will be able to sue governments interfering with their business, even if it’s for carbon reduction goals or passing environmental legislation.

The deal and other trade agreements also support economic competition in foreign countries that already have low incentive for protecting the environment. In his article, Smith discusses that people have aspirations for a better life. Perhaps he does not understand the role a healthy environment plays in the quality of life.

Trade agreements and deregulation seems great when observing them with a narrow scope. However, global interactions are complex, with many direct and indirect results that must be taken into consideration. Smith supports these agreements without considering the complications.

In deciding what the next step for our economy is, we must recognize this complexity, understanding that this agreement would affect the environment and the lives of millions.


Alyssa Luis is a staff columnist for The Daily Campus opinion section. She can be reached via email at alyssa.luis@uconn.edu.