Question

Trade agreements lead to more international trade. Explain how trade agreements boost potential GDP

Answer 1

Trade is crucial to reducing global poverty. Countries open to international trade continue to expand faster, to innovate, to increase competitiveness and to provide their people with higher wages and more opportunities. Open trade also benefits lower-income households by delivering more affordable goods and services for consumers. Integrating with the world economy through trade and global value chains contributes to driving economic growth and reducing poverty locally and globally.

Trade's increasing complexity has serious implications for the world's poor, who are often disproportionately cut off from global , regional – or even local – markets. Poverty is often concentrated in poorly connected geographical areas with active economic centres. The opportunities for companies and communities in these areas to develop skilled, competitive workforce are missed; they are not integrated into global production chains and are less able to diversify their products and skills.

Free trade improves exposure to products of higher quality, at lower costs. Cheaper imports have eased inflationary pressures in the United States , especially from countries such as China and Mexico. Prices are held down by more than 2 percent for every 1 percent market share by imports from low-income countries such as China, leaving more revenue for Americans to spend on other goods.
Free trade signifies further production. At least half of U.S. imports are not consumer goods; they are products for U.S.-based manufacturers Freeing trade lowers the cost of import-input, thus reducing the cost of manufacturing companies and stimulating economic growth.

Free trade increases productivity and boosts creativity. Over time , free trade combines with other market mechanisms to move jobs and capital to more effective uses, enabling business to flourish more efficiently. The outcomes are higher incomes, investment in things like infrastructure and a more competitive economy that keeps generating new jobs and opportunities.
Open competition powers productivity. Free trade ensures that American businesses and employees adapt to the worldwide marketplace's changing demands. But such adjustments are critical to remaining competitive, and that is what drives long-term growth.