Two countries or a group of nations agree to sell goods to each other without charging tariffs. Manufacturers gain access to more markets, and consumers pay less. Good for everybody, right?
For the most part, yes, says Eliza Patterson, an authority on international trade. But like the weather, there can be variations within countries and regions, and within industries.
Those differences can provide fodder for critics of globalization. “There’s incredible ignorance about the benefits and costs of free trade and what it does or doesn’t do,” says Patterson, who teaches at Sciences Po in Paris and at U.S. universities. “Unfortunately, the opponents tend to be more adamant than supporters, which makes it more difficult for politicians.”
Do countries lose or gain jobs?
Both, says Patterson. “Yes, trade does lead to some people losing their jobs. Jobs are displaced. The counterargument is that other, better-paying jobs are created.
“If the U.S. opens its market to African countries, their companies … can export to a new, very large market. That creates jobs, which is good for them. In return, they have to import things from us and that creates jobs in our country.”
“We do what we do best and sell it to them, and they do what they do best and sell it to us,” adds Patterson.
What’s the World Trade Organization?
The World Trade Organization sets global rules and settles disputes. Its 164 member economies exported $18 trillion in 2014. Two-thirds are developing countries. There are more than 500 free-trade agreements worldwide. The United States has free-trade pacts with 14 countries.
Who makes what?
Lowering barriers makes sense, Patterson says, because with global supply chains, “most products don’t come from one country.
“Agricultural products are probably the only ones nowadays that come from one country,” she says. With clothes, “often the yarn comes from one place and is shipped somewhere else that makes the fabric and somewhere else that sews it into a piece of clothing.”
Evolving to stay in the game
Countries move up the supply chain as their industries and capacity develop, Patterson says. “Look at South Korea, which was a major textile producer. Now they’re making computers and automobiles and lots of advanced products. You evolve by exchanging goods and knowledge.”