How the TPP Increases Global Trade
by Camel on December 11, 2015 - 10:39am
Neoliberal free trade is a net positive for humans because competition puts the needs of consumers before the needs of an agenda-oriented government. In this economic structure there will be trade offs, putting many small businesses and fledgling industries out of business, but in the end we need to globalize our economy for competition. When the consumer has the power to choose, we all win. Neoliberal free trade is positive because it decreases taxes for goods being imported, and thus exported goods from other nations. In this essay, I will also be analyzing the Trans Pacific Partnership and how we can learn and grow from NAFTA.
Tariffs and taxes change how we make buying decisions. These buying decisions are based on the quality of products and the availability. Taxes are a detriment to global trade because they inhibit competition. Let me give an example: you want to purchase a $10 T-Shirt but shipping costs $3 and taxes are $2. If you decided to make that transaction, the original price would be 50% more than the raw purchase price. In turn, this might change the buying decision. One might have to buy a lesser quality T-Shirt for $10 because the extra $5 becomes a deterrent for the transaction. Buying the alternative also gives the consumer a poorer quality T-Shirt, which does not benefit the consumer. When we steer away from free trade agreements, we cannot benefit global consumers by providing them a better alternative, and thus cannot make money. There will be trade offs. Nations build their economies on tariffs to protect struggling or fledgling industries. We all have tariffs. Tariffs protect national jobs, which directly create security for millions of people, but what we need to realize is that tariffs handicap innovation and competition. How are we to compete on a global stage when we cannot modernize, produce, and sell at global standards? Simply unfair to consumers who are led to purchase products that have been under tariffs because they cannot receive the best quality product for the best price. Taxes only hurt the people, thus we need to embrace a free trade global web.
This leads to NAFTA. What did NAFTA do? NAFTA allowed goods and services produced and distributed between US, Canada, and Mexico to have no tariffs. A real world of NAFTA helping consumers starts in Mexico. Laundry detergent used to be extremely watered down because water is cheap and chemicals are expensive. Consumers were using detergent that did not give them cleaner clothes, but were paying prices that reflected shiny clean clothes. There was no competition and these people could not purchase a higher quality product. Because of NAFTA, Proctor and Gamble made a factory in Mexico and they created the Tide Pod because it was going to be an easier alternative for the Mexican consumer. They took this technology created in Mexico and brought it back to the US and there was no taxation and ALL the consumers benefitted. This was intellectual property that worked for every country. There was a short-term problem because the historic watered-down detergent had to lay off workers, but they had to evolve their product to compete. The owners of that company had to face the fork-in-the-road where they could choose to compete, or they could chose to back down. One could argue that this is demolishing the local businesses, yet I would come back and say that people were not getting the best products to serve their needs. Why would you deny someone of receiving the best? The consumer doesn’t benefit as a whole if there isn’t any competition. NAFTA has expanded and created more than 450 million new consumers because it is now growing to Central American involvement as well as South America. NAFTA and free trade allow for global growth, local partnership, and consumer gains.
But let’s shift the attention towards the current global free trade agreement on the floor, the TPP. If the TPP moves forward, it will represent 40% of the global economy, and that is if China does not agree to join. The TPP needs to go forward because it will end protectionism. Global free trade does not work at its best when there is protectionism and that is because protectionism is an “…economic strategy to limit trade. Government’s construct “barriers” to restrict trade in order to help with their domestic businesses.” (Marks “understanding Trade Homework assignment” Stopping protectionism is specifically important for the Asian countries because of their nationalist pride in producing much of what they consume. Everyone benefits when there are more free and open markets because this allows competition between products. There are always short-term problems, usually surrounding people losing their jobs, but those people are now able to buy higher quality products for cheaper prices.
What the TPP needs is China’s involvement. China is the largest consumer market in the world, but also the largest producer of factory products sold at margins of what the price should be. In the end, China is being a bully. China wants to undercut the market with cheap prices so that they are always the best competitive option for businesses to trade with. If we can get our American products into China at prices that aren’t being taxed, we can compete with them because of our higher quality, and in that process, make a lot of money.
The TPP needs to put the US economy first. This is not what workers what to hear, but instead of subsidizing the people, lets take the money to education to train these people how to compete in other industries. We cannot support ourselves with the mountain of debt we are suffocating under to not take this option. We need to find our strengths (innovation, technology, agriculture, etc.) and own those industries. We simply cannot afford to subsidize people in business sectors that are not giving us a competitive edge. As a nation, we need to own the high skill production of goods. This might involve people shifting their attention away from what they are currently doing, to what needs to be done for our nation.
The plan we need to take starts with education. More jobs need to be rooted in individuals who prioritize education. When higher level education is not an option, trade schools and community colleges need to be more affordable because our society needs to be educated to intellectually compete with the innovation coming from all over the world. Similarly, trade schools need to prepare individuals for an economy focused around higher-skilled manufacturing. Community college educations need to be applied education where the lessons in the classroom correlate to the skills needed to sustain a constant middle class America. From there, we need to promote entrepreneurship to increase innovation. Our nation was founded on the principals that one can live the American Dream. We are the nation of dreamers, and dreamers innovate. The US needs to lead in the creation of new industries and those companies and business sectors need to have their roots firmly planted in the United States. We need to be the “Breeding grounds” for new industry so we can lead the charge in defining the boundaries later on. Technology needs to live, breath, and sustain its life in the US. Our dedication to science, technology, math, the arts, and innovation needs to start early. Inspiring youth to innovate through any medium will bring back the fire to a society that needs new and fresh ideas.
Ultimately the customer votes with their wallet. It becomes more affordable to get quality goods from anywhere without unfair tariffs and taxes to benefit the consumer. This shift will take people out of business, but there needs to be evolution in business in order to benefit the consumer. Capitalism is the free flow of money and transaction. In the end, tradeoffs will happen, people will lose jobs, but its how we get back on our feet and innovate that will define who we are.