Increased Foreign Direct Investment (FDI)

Free trade and its benefits

Free trade is an economic policy that allows countries to buy and export goods with lower or no tariffs. Trade restrictions offer both benefits and drawbacks for both traders and consumers. Trade has been hampered by the introduction of taxes, quotas, embargoes, standards permits, and subsidies. China and the United States account for 40% of global GDP. Economists agree that the North America Free Trade Agreement (NAFTA) has benefited North American economies significantly. NAFTA’s goal was to reduce trade costs, promote business investment, and assist North America in becoming more competitive in the global market. NAFTA created five million jobs in the United States through exports and imports (Marcus). United States manufacturers created over 800,000 jobs due to the free trade in North America because manufacturers exported $487 billion which resulted in the generation of $40000 for every export manufacturer. 40% of imports originated from American countries. Therefore, Trump’s imposition of 5% tariff on goods would lead to loss of American jobs.

Increased Foreign Direct Investment (FDI)

United States business profits have been boosted through FDI with the help of NAFTA (Thomas). Business profits have tripled through gaining more market exploration and development through foreign investment. NAFTA helped in innovative business and helped in securing intellectual property. It also boosts FDI through laws protecting and safeguarding company’s rights.

Low commodity prices

Free trade between North American countries lowers the costs of living through low prices in products due to no imposition of taxes. The president of the United States, Donald Trump, wants to withdraw the country From NAFTA which will cause inflation due to tax imposition hence a rise in prices of commodities for American consumers (Marcus).

Benefits trading Countries with Competitive advantage

Free trade enables countries such as China to produce goods and specialize in its area of production which is electronics and machinery, hence enjoy competitive advantage since it becomes the only supplier to other countries (Robert). Also, the purchasing countries can also benefit from the low prices of the imported commodity being a win-win situation of both trading countries.

Increased economic growth

China being one of the leading countries in growth economically engages in free trade (Robert). Therefore, free trade is seen as the key to successful economic growth. Increased economic growth is seen through specialization of specific products such as Chinas specialization in electronics and machinery, therefore maintaining a high level of productivity. Economic growth is also as an aspect of productive competition traded at low prices.

Expertise and Technology Transfers

Local companies have less expertise and technological ideas than global companies. Therefore, free trade enables global firms to get access to such opportunities and develop the resources through training the locals on best practices giving local firms access to new practices.

Reduced Government Spending

Free trade in North American countries allows firms to bid on entire government contracts which allowed a level playing field in business with all companies within its agreement borders (Thomas). Government budgets reduced and allowed more competition at lower costs.

Dynamic Business Climate

Local businesses were protected before NAFTA was introduced, therefore, free trade enables healthy business competition between local and global firms enabling local firms to gain new business ideas from global firms making these firms successful in business (Marcus). United States firms in California and Virginia have gained experiences through the dynamic business climate.

Works Cited

Noland, Marcus. Assessing Trade Agendas in the Us Presidential Campaign. Washington, D.C: Peterson Institute for International Economics, 2016. Internet resource.

Paterson, Thomas G. American Foreign Relations: Volume 2., 2014. Print.

Sutter, Robert G. U.s.-chinese Relations: Perilous Past, Pragmatic Present. , 2013. Print