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US & China should sign a free trade agreement for mutual benefit

Koon Yew Yin 8 Nov 2020

4 years ago, when Trump became US president, I thought he could improve the economy of both US and China because he was a businessman. Almost all politicians have no experience in doing business. I was surprised that he started a trade war with China to reduce its trade deficit with China. 

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To win more votes for his re-election, he started bashing China and unfortunately most Americans also liked it. To demonstrate his dislike for China, he refused to follow the Chinese proven method of controlling the spread on the coronavirus. He did not even want to wear a face mask which is the first line of defence against the virus. He called it Chinese made virus or Kongflu. As a result, US has the greatest number of Covid 19 cases in the world. 

Due to Trump’s mismanagement of the country, he lost his re-election. Now the vote counting is over and Joe Biden is the new US President. I hope he will stop the trade war with China because no one can win in any kind of war. I hope Joe Biden will sign a free trade agreement with China. 

Free trade agreements:

Free trade agreements are treaties which regulated the duties, taxes, and tariffs which countries impose on the imports they receive or exports that are sent. When such an agreement is in place between 2 countries, then they are able to move goods and services with more freedom across borders. This structure creates economic opportunities for all the parties involved, including a chance for workers to immigrate with fewer restrictions to take advantage of better jobs that may be available to them.

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There are always significant advantages and disadvantages to consider with any contractual arrangement, so here are the pros to consider.

List of the Pros of Free Trade

1. Free trade increases economic growth for each country.
American consumers can enjoy cheaper Chinese made products. When China export increases, it can afford to import more goods and services from US.  

2. It offers a more attractive business climate to organizations.
Businesses are often protected when countries are trading with one another frequently. When there is a free trade agreement in place, then these protections begin to disappear. This process creates more of a free market environment where companies are forced to look for new ways to innovate as a way to stay competitive in the marketplace. Instead of allowing for stagnation to occur because there is always a guaranteed income, governments pursuing free trade increase economic opportunities because they inspire new processes.

3. Free trade will usually lower government spending habits.
One of the ways that a government works to protect its local industry segments is through the use of subsidies. These benefits may include tax incentives, monetary rebates, protective tariffs, and other market manipulations which allow the corporation to function closer to a monopoly then if it were forced to compete on a global stage. Free trade lowers the expenses that for which a government must budget because companies no longer require the same protections. They can become competitive in multiple markets all at once. This spending on protectionism can then be applied to other societal needs.

4. It offers consumers access to a higher level of expertise.
When companies are operating in international affairs, they have more access to information. This data allows them to create more effective best practices that will eventually help them to save money because they can cut the costs of their overhead. With the presence of free trade in the economy, these organizations can then provide access to their experience by working with domestic providers who are serving local households. That makes it possible for everyone to benefit from the expanded trade opportunities.

5. Free trade can improve the safety of workers.
When companies are reviewing their best practices, then there are several sectors that they review for improvements. Employee safety is usually one of the first beneficiaries of a free trade agreement. This outcome is especially relevant when considering the manufacturing, mining, and oil producing industries. When workers can stay safe on the job, then they can remain productive, helping each organization to eventually improve its bottom line.

6. It allows for companies to transfer technologies to one another.
When there is a free trade agreement in place, then the multinational companies make it possible for local organizations to receive access to the latest technologies from their industry. This process makes it possible for the local economy to start growing, which means there are additional job opportunities that begin to develop. The transnational corporations can even help provide training at the domestic level as a way to provide experience to future workers who may want to reach out to the global community one day.

7. Free trade results in higher levels of foreign direct investment.
When there are fewer restrictions in place for companies who want to do business overseas, then domestic organizations and local communities’ benefit from a higher level of foreign direct investment. These funds help to add capital as local industries begin to look at the potential for expansion efforts. It is also a way to boost the influence that domestic businesses have within the region.

From the perspective of the United States, this advantage of free trade makes it possible to provide a currency of value (namely the U.S. dollar) to developing countries that would normally stay isolated without an agreement in place.

8. It can provide a direct economic boost to border communities.
When there is a land border between two countries that have a free trade agreement, then the import/export transactions for the two governments occur at the ports of call which exist along this line. This structure has a positive effect on both local economies almost immediately. 

I have written the pros of Free Trade. I will write about the Cons of Free Trade when I am free next week end. 

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