Question
Free Trade Agreements
A photograph shows a large cargo ship stacked with freight containers at a busy port. A crane is poised above the ship.
Today, an average-sized cargo ship can carry 4,000 20-foot-long containers filled with goods. The largest cargo ships can carry as many as 18,000! In 2018, more than nine million cargo ships sailed in and out of the Port of Los Angeles alone. That’s a lot of trade!
Trade is a fundamental part of most civilizations. Countries sell resources that they have and goods that they make in exchange for things that they don’t have or make. For centuries a small number of countries built great trading empires through conquest. Over the past 100 years, however, nations once considered parts of those empires have gained complete or partial independence. Today trade relations are most often established through treaties between nations.
After World War II, the United States and several other countries wanted to spur economic recovery by lowering barriers to trade. They established the General Agreement on Tariffs and Trade (GATT). This agreement required member nations to negotiate further treaties, and over time, it gave rise to the modern free trade agreement. That’s an agreement by countries to trade with each other without setting tariffs (taxes on trade goods) or quotas (limits on the number of trade goods that can be imported).
You might recall that the United States signed the North American Free Trade Agreement (NAFTA) with Canada and Mexico in 1994. In 2004, the nation joined the Central America–Dominican Republic Free Trade Agreement (CAFTA-DR), expanding free trade between the United States and countries in Central America and the Caribbean. By 2017, the United States had free trade agreements with 20 nations across the world. That year, the United States exported more than $1.5 trillion in goods and imported more than $2.3 trillion. Those figures show just how much the United States depends on other countries not only to buy U.S. goods but also to provide goods that Americans need and want from across the globe.
Industrialization in the 1800s and early 1900s helped make the United States an economic powerhouse. For decades, the nation thrived as a result of a strong manufacturing base. More recently, however, the nation’s manufacturing sector has declined. In 2017, manufacturing made up only about 20 percent of the United States’ gross domestic product (GDP), or the nation’s economic activity. Farming made up about 1 percent. Meanwhile, services accounted for a staggering 80 percent!
Services comprise a wide variety of occupations, including health care, education, restaurants, retail, and information technology. The rise in importance of these industries has turned the United States from a manufacturing to a service economy, which focuses more on the buying and selling of services than of goods. Americans still consume a lot of goods, but services fuel economic growth.
In recent decades, leaders of multinational U.S. corporations have increasingly decided that operating factories and outsourcing jobs overseas is more cost effective than keeping those factories and jobs in the United States.
The ability to purchase goods manufactured outside of the United States has led to an effective drop in salary in the manufacturing jobs that remain, contributing to wage stagnation. Wage stagnation occurs when the value of wages over time does not keep up with the rate of inflation. When wages remain the same or increase at a rate lower than that of inflation, the buying power of workers’ wages is decreased. To keep labor costs down in order to compete with the price of imported goods, many manufacturers have either reduced wages or not increased them at a rate consistent with inflation.
In 3-5 sentences, evaluate if the United States has been a leader in the global economy in recent decades.
A photograph shows a large cargo ship stacked with freight containers at a busy port. A crane is poised above the ship.
Today, an average-sized cargo ship can carry 4,000 20-foot-long containers filled with goods. The largest cargo ships can carry as many as 18,000! In 2018, more than nine million cargo ships sailed in and out of the Port of Los Angeles alone. That’s a lot of trade!
Trade is a fundamental part of most civilizations. Countries sell resources that they have and goods that they make in exchange for things that they don’t have or make. For centuries a small number of countries built great trading empires through conquest. Over the past 100 years, however, nations once considered parts of those empires have gained complete or partial independence. Today trade relations are most often established through treaties between nations.
After World War II, the United States and several other countries wanted to spur economic recovery by lowering barriers to trade. They established the General Agreement on Tariffs and Trade (GATT). This agreement required member nations to negotiate further treaties, and over time, it gave rise to the modern free trade agreement. That’s an agreement by countries to trade with each other without setting tariffs (taxes on trade goods) or quotas (limits on the number of trade goods that can be imported).
You might recall that the United States signed the North American Free Trade Agreement (NAFTA) with Canada and Mexico in 1994. In 2004, the nation joined the Central America–Dominican Republic Free Trade Agreement (CAFTA-DR), expanding free trade between the United States and countries in Central America and the Caribbean. By 2017, the United States had free trade agreements with 20 nations across the world. That year, the United States exported more than $1.5 trillion in goods and imported more than $2.3 trillion. Those figures show just how much the United States depends on other countries not only to buy U.S. goods but also to provide goods that Americans need and want from across the globe.
Industrialization in the 1800s and early 1900s helped make the United States an economic powerhouse. For decades, the nation thrived as a result of a strong manufacturing base. More recently, however, the nation’s manufacturing sector has declined. In 2017, manufacturing made up only about 20 percent of the United States’ gross domestic product (GDP), or the nation’s economic activity. Farming made up about 1 percent. Meanwhile, services accounted for a staggering 80 percent!
Services comprise a wide variety of occupations, including health care, education, restaurants, retail, and information technology. The rise in importance of these industries has turned the United States from a manufacturing to a service economy, which focuses more on the buying and selling of services than of goods. Americans still consume a lot of goods, but services fuel economic growth.
In recent decades, leaders of multinational U.S. corporations have increasingly decided that operating factories and outsourcing jobs overseas is more cost effective than keeping those factories and jobs in the United States.
The ability to purchase goods manufactured outside of the United States has led to an effective drop in salary in the manufacturing jobs that remain, contributing to wage stagnation. Wage stagnation occurs when the value of wages over time does not keep up with the rate of inflation. When wages remain the same or increase at a rate lower than that of inflation, the buying power of workers’ wages is decreased. To keep labor costs down in order to compete with the price of imported goods, many manufacturers have either reduced wages or not increased them at a rate consistent with inflation.
In 3-5 sentences, evaluate if the United States has been a leader in the global economy in recent decades.
Answers
GPT-4o mini
In recent decades, the United States has maintained a significant role in the global economy, largely through its extensive network of free trade agreements and its position as a major exporter and importer of goods. Despite a decline in the manufacturing sector, which has shifted towards service industries that now account for 80% of GDP, the U.S. remains a crucial player in international trade and investment. However, the outsourcing of jobs and the resulting wage stagnation have raised concerns about the sustainability of its economic leadership. Overall, while the U.S. continues to influence global trade patterns, its status as a leader is challenged by internal economic shifts and increasing global competition.