Olympiaturm, Munich, November 2016, Personal Archive
- Brief History of Free Trade Agreements
The first FTA was signed in 1994. Since then, free trade agreements have led to a number of benefits for both parties involved in the agreement. These agreements flourished in the course of time, such that at the moment there are many such agreements. For example: USMCA (United States–Mexico–Canada Agreement, former NAFTA), ASEAN (The Association of Southeast Asian Nations), EFTA (the European Free Trade Association), SAFTA (the South Asian Free Trade Area), the Pacific Alliance. Moreover, there are also many bilateral agreements between countries, such as between the EU and Canada, the EU and Japan and the EU and Korea, and many free trade areas.
NAFTA, for example ensures the most favored nation status to all the co-signers, the elimination of many tariffs, the obligation of a certificate of origin. NAFTA also ensures procedures to resolve trade disputes, respects patents, trademarks and copyrights and makes easy travel possible.
- Benefits of Free Trade Agreements
On the one hand, these attributes of free trade agreements understandably led to many positive changes: trade increase between Canada, Mexico and the USA, an increase of economic output, a growing number of jobs. Other advantages are a decrease in prices, support with government spending and increased foreign direct investment.
- Disadvantages of Free Trade Agreements
On the other side, the application of the NAFTA prerogatives also led to a number of disadvantages: both the USA and other countries in the agreement hailed the creation of jobs . Approximatively 5.4 million jobs were supported in the USA whereas the trade with other countries supported 17.7 million jobs. However, job losses unfortunately counterbalanced this positive aspect; according to the 2011 report of the Economic Policy Institute, approx. 700,000 people lost their jobs . The most affected industries belonged to the second industrial sector, for instance the manufacturing, automotive, textile, computer and electrical appliance industries.
- Impact on jobs
Moreover, job migration also meant suppressed wages for USA workers. The companies developed a scheme to prevent workers from joining unions. These companies threatened with moving their headquarters (and consequently their labor force) into Mexico if the employees took drastic measures such as organizing themselves into unions. Faced with this obstacle in joining unions to fight for their interests, the employees could not argue for better wages or for other benefits.
- Farmers out of work
While it did lead to the creation of jobs, NAFTA also led to Mexican farmers being out of work. It allowed farm products subsidized by the US government into Mexico, at lower prices than the existing Mexican farm products. As a result, the Mexican products could not compete with the USA products in terms of price. As many as 1.3 million farmers were out of business, according to the Economic Policy Institute.
- Work conditions
The working conditions did not undergo any substantial improvement since the application of this free trade agreement, as many low-cost factories continued to function in Mexico. These are called maquiladoras in Spanish and are usually located near the Mexican border. Their aim is to produce good at a lower cost which will afterwards be exported in the USA. Hence, they also benefit from carrying business with the USA, on the basis on NAFTA.[1]
- United States–Mexico–Canada Agreement
In September 2018 the United States–Mexico–Canada Agreement (USMCA) replaced NAFTA and entered into force in July 2020. It aims to ensure improved rules of origin for products, to modernize and improve agricultural trade in North America, to support trade opportunities and to protect US intellectual property . It also covers new domains: Digital Trade, Anticorruption, and Good Regulatory Practices and brings support to small and medium-sized enterprises.[2]
Nevertheless, it is not the only free trade agreement which harbors many advantages as well as galling disadvantages.
- The Association of Southeast Asian Nations
The balance of advantages and disadvantages does not look any better in the case of ASEAN.
ASEAN comprises a total of about 630 million people[3], not just from China and India, but also from neighboring Asian countries, such as: Singapore, the Philippines, Indonesia, Myanmar, Malaysia, Brunei, Thailand, Vietnam Cambodia and Laos. This makes it the fifth largest economy in the world, but also renders this union its unique challenges and concerns. The ASEAN has no single currency, like most countries in Europe, but it does fight to address common concerns. It boasts of examples of cooperation, such as in the fight against pollution, human trafficking and illegal wildfire trade.
- Advantages for ASEAN
The ASEAN commits itself to the following positive developments: easier and cheaper travel options, as in the visa-free entry countries such as Cambodia, Indonesia and Malaysia, plans to improve transportation, cheaper goods and services, taxes either lowered or eliminated, better employment opportunities, especially in the IT industry (since it is the fastest growing, with about 700 million digital consumers), better education (support for students, scholarship programmes). Some countries, such as the Philippines might not be so well prepared for globalisation.[4]
ASEAN provides stability for all the members of the agreement, from many points of view. However, its members are not quite ready for Western-style democracy. Such matters might take more time as opposed to other aspects, concerning transportation, education, employment and so on.
Besides the challenges it faces, ASEAN is also not without its weaknesses, such as corruption, unequal social strata due to disparities in economic development, environmental degradation and political issues.[5]
Sources:
Pros and Cons USMCA (former NAFTA)
[2] USMCA FTA
[5] ASEAN Weaknesses
