Recently, in India, we noticed that the groups of farmers were out on the street to demonstrate against the government’s decision to import Agri commodities. In the similar way, Germany saw intense demonstrations against the free trade deal with US and Canada. This is the bare truth of ‘free trade disadvantages’ for market participants.
Are there any disadvantages of free trade?
In the similar tune, US President Trump argued that Chinese export is responsible for the job losses in US, and blamed for Chinese export driven growth strategy for trade imbalance.
The ongoing US-China Trade war and protectionist policies of respective nations has once again ignited the dormant debate on ‘free trade disadvantages’.
Now, it is essential to know whether the ‘free trade system’ is flawless or need certain efforts for further improvement.
Free trade disadvantages and impacts
So, let’s take a look at the free trade disadvantages and its short, as well as long term impacts on market participants, employment, environment, and on overall global politics.
Does free trade impacts jobs and employments?
This is the most common argument of opponents against the free trade system.
As per theirs point of view, nowadays, production in China is widely considered cost effective due to low, wages, cheap resources and so on.
Therefore, China has become the ‘factory of world.’ And, the market share of China has grown considerably. In such situations, people are losing jobs in the other nations due to increased demand for Chinese products.
Loss of job is a serious thing as it impacts saving, personal capital, and standards of living.
Export driven growth strategy is somehow responsible to place free trade system in the negative zone.
Does free trade affect food security?
It is the least noticed but most important negative impacts of free trade system.
It is commonly noticed that export oriented and import-competing agro- industries divert theirs land resources for cash or plantation crops ignoring food crops. Everything is done to make product competitive to be market leader.
Shockingly, it has often been proved by the land use policies of respective nations of free trade regions (FTA)
Piracy of technology or dispute over Intellectual Property Rights
Since many decades, it has been a bone of contention between inventors and potential beneficiaries. Strangely, majority of patent rights related to biotic resources are with developed countries.
But, the pool of such resources are abound in developing countries. Isn’t it mad rush for resources? Then, conflict is unavoidable.
It is happening because inventors always stress to recoup their investment pumped in research. Whereas, potential beneficiaries argue about the unaffordable prices.
Regional block politics and failure of multilateral negotiations — fallout of free trade negotiations, isn’t it?
It is results of favour and disfavour policies.
Even though, the Uruguay round was a milestone in term of consensus over the barrier reduction, the later development raises many doubts over the result oriented negotiation.
It is true that regional economic blocs are engine of growth and appreciable incentive for integration.
But, at the same time, these are acting alternatives for the stagnated negotiations of the WTO.
Economic inequality and regional disparity due to favourable market access
Open market embodies the democratic principle that is freedom to trade.
As a result, migration of everything begins to capture favourable condition.
Many staunch aspirants are pumping their investment in areas from where they could reap profit in return, ignoring unprofitable one.
Logically, consequent repercussions are regional disparity and economic inequalities.
Why need for agricultural subsidies?..
Why are the negotiations of WTO not solving the bottlenecks?
To preserve the interests of unskilled labours of import-competing industries, high income countries are offering large amount of subsidies for them. This is the best example of free trade disadvantages for farmers.
Environmental degradation and loss of cultural identity
It is happening due to loss of identical products in search for global market access.
Cost effective production with lower opportunity cost is prerequisite to scale more in competitive market.
Is there anyone to compromise profit for negative externality? Definitely no one. So, the scapegoat is bystander.
These are some common negative impacts or disadvantages of free trade.
After all, healthy competition is necessary. We know that conflict oriented competition wont bear better results.
Instead, will cultivate breeding ground for counter arguments. After all, it is wrong to make free trade system a beast of burden for own mistakes.