Free-trade was a hot-button issue leading up to the 2016 election trans-pacific is going to
destroy your auto industry in Ohio I did hope that the TPP negotiated by this administration would
put to rest a lot of the concerns that many people have expressed about trade agreements and with
the 2020 election just on the horizon the issue is sure to rear its face again Donald Trump regularly
claims that doesn't win anymore we used to win we don't win anymore we lose on trade look at
our country we don't win anymore we can't win on trade we don't fight to win anymore we don't win
anymore last year the u.s. sold 1.5 trillion worth of American goods abroad but imported 2.2 trillion
a trade deficit of more than 700 billion dollars but this raises an important question is our large
trade imbalance a result of too many free trade agreements or too few and does the trade deficit
even matter don't forget to subscribe so you never miss an upload and let's jump in by definition
free trade agreements level the playing field when they're not in place countries often tilt that
balance against US producers through tariffs and other barriers to trade first off let's look at
the facts in 2019 the US had free trade agreements with 20 countries that collectively bought almost
half of all US exports and the u.s. branagh trade surplus with 14 of those 20 countries on the whole
US trade with the 20 free trade nations was relatively balanced with 710 billion in exports
and 774 billion in imports in contrast trade with the other 175 nations who we don't have a
free trade agreement with were grossly unbalanced 792 billion in exports compared to 1.5 trillion
and imports that means 91 percent of our trade deficit comes from countries with whom we don't
have an FTA like China and Japan this isn't to say that if we made free trade agreements with
all those 175 countries then we'd suddenly be running a trade surplus across the board the US
trade deficit with China is just over four hundred billion dollars and if we were to sign a free
trade agreement that wouldn't suddenly reverse factories are already located in China and the
cost of labor is significantly cheaper but what this does show is that the existing free trade
agreements aren't robbing the u.s. of trade and even more than that history shows that the balance
of trade has generally swung in the USS favor after implementation of a free trade agreement
in 2003 the year before the u.s. Chile FTA went into effect the u.s. exported four billion dollars
worth of goods to Chile and imported five billion from it last year more than a decade after the
free trade agreement was put in place the u.s. exported fifteen billion dollars to Chile while
importing 9 billion a small trade deficit before the FTA swung to a large surplus today and Chile
isn't the exception but the usual trend in the last three decades after signing an FTA the u.s. s
trade surplus increased 70% of the time of course there are exceptions most notably with Mexico
our largest free trade partner but trade deficits and surpluses or the end-all-be-all trade isn't a
zero-sum game of winners and losers trade creates wealth by allowing nations to specialize in what
they do best and obtain from others where they do worse the US has lost a lot of jobs overseas
in recent years in the last two decades NAFTA the North American Free Trade Agreement cost the u.s.
more than half a million jobs to Mexico alone this is the biggest impact free-trade has cost
the US but it's important to realize two things the first by and large the jobs lost as a result
of NAFTA were low-paying jobs that we didn't really want and the second the vast majority
of those jobs would have been lost with or without NAFTA they may have just gone to other countries
outside the continent on the other side because of FTAs like NAFTA we've been able to buy most things
for much cheaper for example the hundred billion dollars that we spent on food in 1960 amounted to
twenty percent of u.s. GDP at the time but the 1.5 trillion dollars we spend today on food is
only about eight percent of everything we make and included in that isn't it 300 billion dollars for
food processing that is paid for today that was once done primarily by women in the household
as we spend less on food as a percentage of our GDP over time that shows us that the comparative
cost of that food has been going down on the whole accounting for inflation medium family real income
is 29 percent higher today thanks to international trades effect on lowering prices but just because
America is better on the whole doesn't mean those directly displaced by job losses are really better
off as jobs in one sector of the economy have dwindled jobs and others have grown but the skill
sets for these jobs often don't overlap so it's not as if these workers can simply transition from
a shrinking field to a growing one a manufacturing worker probably won't easily be able to move into
the grown computer science field at least not without first going back to school and learning
some new skills but research points to a somewhat surprising fact when the economy is doing well
for people that lost their job due to free trade agreements their average income over the next 20
years turns out to only be about 10 percent lower than people not caught in the layoffs obviously
10 percent isn't nothing but it's not as big of a drop as you'd expect this shows that you don't go
from a $35 an hour manufacturing job permanently down to a $9 an hour McDonald's job but instead
find other employment opportunities in short those whose jobs vanish usually find something else to
do that doesn't involve too much downward mobility whether an income or status all this ignores other
beneficial factors from free trade agreements like how is stronger and more prosperous Mexico on our
southern border props up the USS position as a global superpower but what if the u.s. increased
tariffs on foreign countries to protect American jobs well this would lead to retaliatory tariffs
and increasing prices when companies have to pay tariffs they turn around and pass that new
cost on to the consumer the china-us trade war from 2019 cost the average u.s. household $500
in the short term we see these higher prices and in the long run protectionist trade policies lead
to less competition for example India and many countries in Africa have had high tariffs on
foreign cars for decades the Masek producers are almost entirely protected than international trade
and so they don't have an incentive to develop and improve and so they've continued to produce
terrible cars these policies are reducing competitiveness and slowing the spread of
world-class practices in the value chain the end result consumers in those countries get stuck with
worse cars as they have no viable alternatives to put this problem in context India is the world's
sixth largest automobile producer by volume but you don't less than one percent of the global
export market the average auto firm in India exported only 5% of its total sales compared to
16% in China all this means is that while India's automobile industry is protected in India the
industry is falling so far behind that the rest of the world won't buy their cars and so both the
Indian consumer and the Indian economy lose out in the long run this was the case for the rest of
the Indian market in the 70s when it was swamped with import tariffs designed to protect the whole
of India's fledgling economy but the country only started having a successful fast growing economy
in the early 90s after the government loosened these protectionist policies there are risks
to free trade agreements like losing industries critical to national security like steel used to
produce tanks or what the recent covert outbreak has highlighted the industries that produce vital
medicines but on the whole three trade agreements have been an incredible benefit to the US while
they've lost some US jobs those jobs would have been lost anyways and those displaced workers have
largely landed back on their feet and on the whole free trade agreements have increased net exports
and made most Goods cheaper so despite all the cheap free trade agreements get from politicians
they've been overwhelmingly positive for the country that's it for this episode of everything
science if you liked the video consider watching the one recommended in the outro and if you loved
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