What Are Free Trade Agreements?

September 5, 2018

There’s a lot of talk about the role of corporations in our economy. But, no one takes the time to explain how they work and what that means for you and me.

This series, Corporations 101, does just that. Today, we’ll explain what a Free Trade Agreement or FTA is and how it affects American workers and families.

American businesses and workers have long thrived in the international economy. But in recent years, some countries have implemented national trade policies that unfairly favor their workers and companies at the expense of American workers and companies. This is where FTAs come in.

An FTA helps create a more level playing field for American workers and and businesses to succeed. These agreements create a more accountable and fair trading relationship between two or more countries. They promote fairness for all countries involved by reducing trade barriers, cutting tariffs — which are taxes on imported goods — and establishing a fair set of rules.

FTAs also help prevent countries from using unfair trade practices to hurt American companies and workers. FTAs rebalance the rules governing America’s trading relationship with other countries. They make other countries more accountable for their actions.

The importance of enacting FTAs has increased as the world has grown more competitive in recent years. Yet, there remains some confusion about the impact of trade and FTAs and whether expanded trade helps or hurts American workers and our economy.

Here are the facts:

The United States has some of the world’s lowest tariffs and fewest trade barriers. Enacting FTAs with other countries, is one of the most effective ways to get foreign countries to lower their tariffs and remove their unfair barriers for the products made by American workers and companies.

This helps increase U.S. exports to the rest of the world where 95% of our potential customers live. More U.S. exports lead to higher sales by companies, which drives our economy and adds to the 38 million U.S. jobs that currently depend on trade.

Our FTA partners benefit from these agreements as well. FTAs help improve living standards and innovation. While FTAs may create questions, FTAs have a positive impact on U.S. job creation and economic growth and on our everyday lives.

Our nation currently has just 11 FTAs with 17 countries, but there are nearly 300 non-U.S. agreements in force across the globe. Many more are under negotiation without the United States. With about 200 nations in the world, the potential to make trade fairer for the United States, maintain our competitive edge, and further expand our economy through FTAs seems limitless.

Trade is an opportunity to create more U.S. economic growth and jobs, if we do it right.