In: Economics
Regional trade agreements are between countries in a specific region. The most powerful are those that encompass a few countries covering a wide and contiguous geographic area. These include the North Atlantic Free Trade Agreement and the European Union. That's usually because the countries involved share similar history, culture, and economic goals. Regional trade agreements are hard to create and enforce when the countries are very diverse.
Trade pacts reinforce U.S. political and strategic interests beyond the gains in commercial ties. Recall that the first U.S. free trade pact was in 1985 with Israel, and it is a cornerstone of the U.S.-Israel relationship. The Trans-Pacific Partnership will similarly cement American ties with the Asia-Pacific region. It reassures our allies that the United States is a reliable partner that remains engaged in a region facing North Korean adventurism.
To say that trade agreements are good for America doesn’t mean that they benefit all Americans. Some firms can take advantage of the new opportunities and others suffer from increased competition. Yes, trade deals can displace some workers from their current jobs, but they also create many new jobs in areas where America has a competitive advantage such as business services and high-tech industries. Compared to overall U.S. job creation and dislocation each month, affected largely by technological advances and changes in consumer demand, the impact due to trade agreements is exceedingly small, but positive because, on balance, trade pacts create better and higher paying jobs than the ones displaced. Workers in manufacturing firms that export generally earn wages 12 to 18 percent higher than their counterparts in firms that only serve the domestic market.