Free Trade Disagreement
Though Bernie Sanders and Donald Trump may stand at opposite ends of the political spectrum, they stand in unison on one topic, the impact of FTAs on developed countries. Sanders and Trump both agree that the FTAs of the late 20th century and beyond have cost Americans several millions of jobs. Sanders adds that FTAs have permitted wealthy individuals to store excess cash in tax havens, as the Panama documents provide strong evidence for. Of course FTAs allow a tax free movement of goods, but this means that they also provide a free transfer of funds between countries involved. This makes it incredibly cheap and easy for individuals and organizations to create shell companies where they can store massive funds tax-free. According to the Canadian Press, Canadian corporations poured more than $270B into tax havens, which is potentially billions of dollars of tax revenue that could have gone towards vital government programs.
Another argument against FTAs is the amount of power it gives to corporations. The TPP in particular has been noted to only permit very limited regulatory restrictions. The enforcement of these regulations is even less stringent. Back in 2011, tobacco giant Phillip Morris sued Australia for implementing anti-smoking regulations which called for plain packaging. The argument was that plain packaging would diminish their brand. The courts ruled in favour of Australia, however the fact that Phillip Morris was confident enough to take the country of Australia to court, shows that the possibility of them winning was high enough to pay large legal fees in the process. In the future, the TPP will allow companies to sue countries for regulations that they believe are (or even have the potential to) decrease profits. Corporations will be able to set up legal bodies, not bound by any federal laws, that have the power to sue countries over lost or potential lost profits. This is likely to lead to a drastic slowing of the adoption of environmental and public health policies.
Looking at FTAs from the perspective of economists, however, shows some benefits. Taxes of any sort will result in a dead weight loss for society, so the general consensus among economists is that FTAs are a positive force for society which maximize efficiency, and as a result, decrease prices for consumers. It is up to governments and society to decide whether the economic gains are worth the detriment to the wellness of the environment and workers. There is a clear separation of wealth as well, with offices in developed countries focusing on R&D, marketing, etc., getting the majority of the profit, while factory workers in developed countries receive very little. Furthermore, FTAs are detrimental to the blue collar worker in a developed country whose job is shipped overseas. Easier access to higher education may mitigate the hardship of this person.
Writer: Lalit Sharma
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.