Is Free Trade Beneficial to the United States Economy, Such As It Reduces Poverty?

Myat Sandy Zaw

Computing in Econ Analysis

Dr.Steven Myers

10/16/13

Is Free Trade beneficial to the United States economy, such as it reduces poverty?

Some groups in the United States blame free trade for the loss of manufacturing jobs, while others blame it for exposing some US producers to foreign competition.

Free trade, however, improves well-being of the economy and is essential to a growing economy. It opens up vast markets. Resources flow to where they are the most productive. Productivity is thus maximized and more competition equal lower cost. Higher savings area result, and the poor and all others have greater income and thus the economy grows. Investment can be expended with growing revenues and competition. Low income economy such as Myanmar has a huge bonus: higher demand for workers equal higher wages and employment. Overall, it improves the wages of workers, improves employment and the economy and creates peace.

A new world trade organization finds that free trade helps poor countries to catch up with rich ones and that this faster economic growth helps to reduce poverty. “World Trade Organization Director General Mike Moore said: This report confirms that although trade alone may not be enough to destroy poverty, it is essential if poor people are to have any hope of a brighter future. For example, thirty years ago, South Korea was as poor as Ghana. Today, thanks to trade led growth, it is as rich as Portugal” (Free Trade helps 2000).

There are 1.2 billion people who survive on less than a dollar a day. A further 1.6 billion, more than a quarter of the world’s population, make do with one to two dollars a day. To reduce poverty, Dan Ben David and Alan Winters from Tel Aviv University and Sussex University said that developing economies need to grow faster, and the poor need to benefit from this growth. Trade can play an important part in reducing poverty because it boosts economic growth, and the poor tend to benefit from that faster growth.

“The study finds that, in general, living standards in developing countries are not catching up with those in developed countries. But some developing countries are catching up. What distinguishes them is their openness to trade. The countries that are catching up with rich ones are those that are open to trade; and the more open they are, the faster they are converging”(Free trade helps 2000).

The study also finds that poor people within a country generally gain from trade liberalization. It concludes that "trade is generally a strongly positive contributor to poverty alleviation—it allows people to exploit their productive potential, assists economic growth, curtails arbitrary policy interventions and helps to insulate against shocks…This concurs with a new World Bank study (2) which, using data from 80 countries over four decades, confirms that openness boosts economic growth and that the incomes of the poor rise one-for-one with overall growth” (Free Trade Helps 2000).

To conclude, free trade allows the US to specialize in goods and services that international workers produce more efficiently than the rest of the world and then to exchange them for goods and services that other countries produce at higher quality and lower cost (Eiras 2004).

Title1: Frequency Trade Opinions by Political Leaning
Trade / Left leaning / In the middle, neither left or right / right leaning / Total
Bad / 148 / 200 / 153 / 501
Doesn't make much difference / 110 / 139 / 96 / 345
Good / 373 / 437 / 424 / 1234
Total / 631 / 776 / 673 / 2080
Title 2: Percentage Trade Opinions by Political Leaning
Trade / Left leaning / In the middle, neither left or right / right leaning / Total
Bad / 7.12 / 9.62 / 7.36 / 24.09
Doesn't make much difference / 5.29 / 6.68 / 4.62 / 16.59
Good / 17.93 / 21.01 / 20.38 / 59.33
Total / 30.34 / 37.31 / 32.36 / 100

Works Cited

Free Trade Helps Reduce Poverty, says new WTO secretariat study.(2000).WTO News: 2000 Press. Releases. Retrieved from http://www.wto.org/english/news_e/pres00_e/pr181_e.htm.

Eiras,A.(2204).Why America Needs to Support Free Trade. The Heritage Foundation Leadership for America. Retrieved From http://www.heritage.org/research/reports/2004/05/why-america-needs-to-support-free-trade.