Here\'s the question given in class and it\'s suppose to be a letter from someon
ID: 1248151 • Letter: H
Question
Here's the question given in class and it's suppose to be a letter from someone who has no idea what this is and needs it to be explain thoroughly, but lol I really have no idea what it is myself and could use some help applying it to this question as well:"A couple of weeks ago, I read a newspaper article about a possible free trade agreement between the U.S. and South Korea that fell through. It would really help me out if you could shed some light on this “free trade” idea – more specifically, could you please explain one potential benefit and one potential drawback of participating in a free trade agreement? Thanks a million for helping me out on this one."
Explanation / Answer
A free trade agreement is a treaty between two or more countries who seek to establish a free trade area where commerce in goods and services can be conducted across their common borders, without tariffs or hindrances. It is important to note however, that capital and/or labor may not move freely and there are typically stipulations on what tariffs would be eliminated/reduced between the countries. In the United States, the agreement must be ratified by Congress before it becomes law. Typically the benefits of free trade outweigh the risks that foreign competition might impose on the United States Economy. The benefits fall into a few categories: 1. The promotion of innovation and competition (ex. increased consumer spending from competition) 2. Generation of Economic growth (ex. jobs) 3. Free trade disseminates democratic values (ex. reduction in corruption) 4. Free trade fosters economic freedom (ex. increases opportunity, choices, and standard of living) Some may argue that the disadvantages of free trade are: 1. increased competition (from specialized products) 2. increased unemployment from increased competition. 3. increased monopolization of MNC corporations 4. economic under development. So one could argue that there is a double edged sword to free trade agreements or a catch 22 in the long run.