Why Free Trade Deals are a tough issue for the US?

The US’s government is not able to get the full support for the proposed 12-nation Trans-Pacific Partnership free trade agreement.  The key issues debated include how the benefits of such free trade agreement will outweigh the costs arises.  Some argues that removal of trade barriers will only make America’s firms less competitive and increasing outsourcing of US’s firms will further worsen the already weak US’s manufacturing firms.  Higher unemployment rate and worsening balance of trade are unavoidable.  These arguments are supported by the previous free trade agreements that US has signed, for example the NAFTA in the early 1990s.  Instead of millions of jobs promised, US had lost 700,000 jobs to Mexico!

Well. On the other hand, US cannot ignore the rising Asian markets for potential engine of growth.  If US is to be excluded from the TPP Free Trade Zones, they will lose their competitive advantages in export to the rising Asian markets as US’s exports will be subjected to higher tariff.  US’s firms may also lose their ability to compete in the world market as they are not able to outsource and import cheaper raw materials.

The only way to critically weigh the benefits and costs is to look at the free trade from a longer term point of view!  The benefits of such free trade zones will benefits the US in the longer terms as US need to build her own competitive advantages in their own higher end and value added industries.  They can no longer compete with the rising Asian economies in low end manufacturing sectors.  Americans need to realise these trends and start preparing themselves with skill upgrading to meet the changing demand of the economy.

Stay tune, we will update you on the latest stand of the US government on PTT !