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Thread: Results of NAFTA

  1. #1
    Cyburbian
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    Results of NAFTA

    American Pad and Paper (AMPAD) recently took advantage of NAFTA and opened a manufacturing plant in Mexico. They recently closed a distribution center here (Mattoon) and also closed their plant in Holyoke, Mass. They are now cutting 125 additional jobs.

    Has anyone seen any direct results from NAFTA? Are there any examples where NAFTA has proven successful?

    http://www.jg-tc.com/articles/2005/0...s/latest01.txt
    http://www.jg-tc.com/articles/2005/0...ws/news001.txt

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    Quote Originally posted by savemattoon
    American Pad and Paper (AMPAD) recently took advantage of NAFTA and opened a manufacturing plant in Mexico. They recently closed a distribution center here (Mattoon) and also closed their plant in Holyoke, Mass. They are now cutting 125 additional jobs.

    Has anyone seen any direct results from NAFTA? Are there any examples where NAFTA has proven successful?
    There was a rope or bag factory (I forget which) in Xenia, Ohio (outside of Dayton) that shut down and moved to Mexico, or so says the graffitti say on the 'for sale' sign.

    Around here, though, manufacturing seems to be impacted more by Asian competition rather than NAFTA. The local tool & die/moldmaking industry is in the process of downsizing as they can't compete on the basis of labor cost, and Huffy bicycle shut down their Ohio plant so as to outsource manufacturing to Asia (they buy the bikes overseas, and put "Huffy" labels on them).

  3. #3
    Here is some official NAFTA propoganda from the US Trade Representative. I have heard many times that NAFTA has helped the US agricultural industry significantly. This fact sheet states that two-way agricultural trade between the US and Mexico has increased by 125% over a ten year period. Don't get too caught up with a specific manufacturing plant closing down. Was the plant fairly old and required a significant capital input of new machinery and/or infrastructure to remain competitive? These plants, sadly enough, often move to new greenfields locations anyway with large incentives offered by other states, cities or countries.


    http://www.ustr.gov/Document_Library...f_Success.html

  4. #4
    Quote Originally posted by Follow the $$
    I have heard many times that NAFTA has helped the US agricultural industry significantly.
    Or it's helped the transnational agricultural giants to stamp out family farmers in both the US and abroad, depending on how you look at it.

    Since 1984, the real price of food has remained constant, while the price farmers receive has fallen by 38%. In 1999, farmers received 21 cents on the dollar from food products, as compared to 10 years ago, when they received 32 cents.

  5. #5
    Cyburbian Luca's avatar
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    Nafta...

    NAFTA and other measures are part of the US' generally (and varyingly) positive attitude toward a more globalized/laissez faire economy. Overall, the flexible US economy has enjoyed considerably higher GDP growth, greater enterprise and much lower unemployment than similarly endowed economies with more restrictive systems (primarily in Europe) for a couple of decades now.

    I've visited the 'savemattoon' website and I recognize it is awful for a town to fade away. Perhaps more extreme shock-therapy would have/would generate a faster turnaround but not necessarily.

  6. #6
    Cyburbian Plus
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    RELATED - Check out the Louisville Courier-Journal's special series of articles:

    BUSINESS WITHOUT BORDERS
    http://www.courier-journal.com/apps/...template=theme

    Part 1: Globalization has cost Kentucky thousands of apparel jobs; it also has taught the region how to compete on the world stage

    Part 2: Once a magnet for U.S. apparel jobs, El Salvador fears losing its factories to China's cheaper wages

  7. #7
    Cyburbian DetroitPlanner's avatar
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    Have I seen the direct results of NAFTA? Yes. Trucks everywhere, on both sides of the border. As the major crossing that connects the new Toronto, Detroit, Monterrey Mexico industrial complex (And dozens of other places like Chicago, London, Dallas); all trucks come through the Detroit/Windsor/Sarnia area. We had enough trucks before NAFTA as the US/Canadian auto industry is constantly building engines in Detroit and shipping them to WIndsor for final assembly or vice-versa.

    This is not a great place to be when the power goes out or there is heightened security. These actions close or slow the border and clog the streets and freeways with trucks.

  8. #8
    Cyburbian jordanb's avatar
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    Quote Originally posted by Follow the $$
    I have heard many times that NAFTA has helped the US agricultural industry significantly.
    Yes, it's greatly expanded their workforce.

    Let's see what it's done to sectors that actually pay a living wage in this country.

  9. #9
    Cyburbian
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    Ditto Detroit Planner, more trucks on the interstates = more wear and tear on the roads. I know an issue in my area is maintenance of these trucks from Mexico entering the States... I haven't kept up with it but sounds like some of the trucks aren't in the best of shape!

  10. #10
    Cyburbian jordanb's avatar
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    Quote Originally posted by Luca
    Overall, the flexible US economy has enjoyed considerably higher GDP growth, greater enterprise and much lower unemployment than similarly endowed economies with more restrictive systems (primarily in Europe) for a couple of decades now.
    Wooh boy. You can suger coat anything, can't you?

    Yes thanks to the flexible US economy, we can by potato slicers for far cheaper than Europeans can, and anyone who wants a shitty job can have a shitty job. If someone is unemployed in the US, it's just because they're too lazy to get out there and pick strawberries for $3.50/hour.

    As far as GDP goes.. I submit this: http://hafd.org/~jordanb/pyblosxom.p...ope-06-26-2004

  11. #11
    Cyburbian
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    Quote Originally posted by Follow the $$
    Here is some official NAFTA propoganda from the US Trade Representative. I have heard many times that NAFTA has helped the US agricultural industry significantly. This fact sheet states that two-way agricultural trade between the US and Mexico has increased by 125% over a ten year period. Don't get too caught up with a specific manufacturing plant closing down. Was the plant fairly old and required a significant capital input of new machinery and/or infrastructure to remain competitive? These plants, sadly enough, often move to new greenfields locations anyway with large incentives offered by other states, cities or countries.
    The plant was built in 1965. It is staying open with about half of its original work force. The distribution center was built in 1998, the City bent over backwards to get them to build it. I saw the US Trade Representative website, other then the time period, they give no indication that their statistics are related to NAFTA. I used their statistics for my column this week. I am NOT responsible for the headline

  12. #12
    Cyburbian Luca's avatar
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    Quote Originally posted by jordanb
    Wooh boy. You can suger coat anything, can't you?
    Yes thanks to the flexible US economy, we can by potato slicers for far cheaper than Europeans can, and anyone who wants a shitty job can have a shitty job. If someone is unemployed in the US, it's just because they're too lazy to get out there and pick strawberries for $3.50/hour.
    Are you saying the average person in the US holds a worse job than the average person in Europe? How typical is fit or US citizens to have to leave their own country in order to hold a professional job? Or be unable to ever leave their employer, no matter how personally vile, beause they'll never get another job again if they do? (Note that the UK is more US-style in employment/economic policy).
    Are you saying being unemployed for 15-20 years on government benefits is better than working (say) for WalMart? How many US citizens pick strawberries for a living?

    Quote Originally posted by jordanb
    Wooh boy. You can suger coat anything, can't you?
    As far as GDP goes.. I submit this: http://hafd.org/~jordanb/pyblosxom.p...ope-06-26-2004
    No one thinks that GDP is the ultimate measure of happiness. However, when discussing ECONOMIC policy, it is ultimately a very good measure, when taken over a substantial period of time.

    I recognize that the US is at an overall level of material wealth where it might make sense to discuss whether there is now a trade-off between further material wealth and other considerations. As to how most MAericans answer that question...I think you know already.

    FYI, I can tell you that any serious economist could just tear to shreds much of what is in that link, but don't have the time right now.

    Quote Originally posted by savemattoon
    The plant was built in 1965. It is staying open with about half of its original work force. The distribution center was built in 1998, the City bent over backwards to get them to build it. I saw the US Trade Representative website, other then the time period, they give no indication that their statistics are related to NAFTA. I used their statistics for my column this week. I am NOT responsible for the headline
    As an aside. Oil is heading for 60 USD/Bbl. Gas prices rising even faster. One issue is that no capacity has been added to US refineries for 30 YEARS (according to our energy guys).

    Maybe Mattoon would benefit from building one but, no, they'd have to suffer through a decade of protests, EPA wrnagling, etc. The refinery will evnetually be built elsewhere.
    Last edited by nerudite; 24 Jun 2005 at 2:04 PM. Reason: double posts

  13. #13
    Cyburbian jordanb's avatar
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    Quote Originally posted by Luca
    Are you saying the average person in the US holds a worse job than the average person in Europe? How typical is fit or US citizens to have to leave their own country in order to hold a professional job? Or be unable to ever leave their employer, no matter how personally vile, beause they'll never get another job again if they do?
    You want to take a poll here, how many people like their jobs?

    Besides, the idea that the mode in the States is that people willingly leave their jobs is absurd. Most people lose their jobs by getting axed. That's because American companies see employees as an "asset" that can be "liquidated" like so much office furniture. And that’s the real fluidity in the American economy. Surely you’re aware of the concept of “market power.” In the US labor market – with the exception of those few sectors where the workforce is still heavily unionized – the employer always has market power. Do you honestly believe that it’s good to work in that type of environment?

    And talk of having to leave the country is disingenuous when you're talking about a country of 250 million people that spans a continent rather than a country of 40 million people on a little island. I've known plenty of people who've had to leave their cities and families and move 1,500 miles away to find work.


    Are you saying being unemployed for 15-20 years on government benefits is better than working (say) for WalMart?
    On US Gov't benefits? They don't last that long. Depending upon your state and circumstances, you generally have less than a year before you magically become employed again because you get booted off the unemployment rolls. On European benefits? Hrmm. Well, at least you don't have to worry about getting sick.

    How many US citizens pick strawberries for a living?
    There's no accurate way to count that but the fact remains that there are far more losers in the US economy than there are winners. Just look at the Lorenz Curve.

    FYI, I can tell you that any serious economist could just tear to shreds much of what is in that link, but don't have the time right now.
    What I wrote was simply a summary of the arguments made by Robert J. Gordon, a professor of economics at Northwestern University. Here are his credentials: http://faculty-web.at.northwestern.e...ordon/VITA.pdf. So, what are your qualifications again? Because to this neophyte, Prof. Gordon looks like a pretty serious economist. By the way, I came upon his paper through this little rag called The Economist; they liked his paper enough to write at least two (2) articles about it, despite the fact that it directly contradicts their "liberal" ideology.

  14. #14
    Have I seen the direct results of NAFTA? Yes. Trucks everywhere, on both sides of the border. As the major crossing that connects the new Toronto, Detroit, Monterrey Mexico industrial complex (And dozens of other places like Chicago, London, Dallas); all trucks come through the Detroit/Windsor/Sarnia area. We had enough trucks before NAFTA as the US/Canadian auto industry is constantly building engines in Detroit and shipping them to WIndsor for final assembly or vice-versa.
    I never thought I would see the day where someone from Detroit would complain about the trucking industry.

    Or it's helped the transnational agricultural giants to stamp out family farmers in both the US and abroad, depending on how you look at it.

    Since 1984, the real price of food has remained constant, while the price farmers receive has fallen by 38%. In 1999, farmers received 21 cents on the dollar from food products, as compared to 10 years ago, when they received 32 cents.
    You are probably about 30 to 70 years too late on the family farm argument. Yes, we live in a transnational corporate world and need to work within this framework. I'm not sure what the figures in your quote refer to, but I agree there are pluses and minuses to the agriculture business and many low-paying jobs as there are in the retail and service industries which are the fastest growing sectors in the US economy.

    JNL: Thank you for sharing the links, they were very informative.

    SaveMatoon: Thank you for sharing your column. Actually, I liked the title. A huge sucking sound is a great description.

    And back to NAFTA.... communities need to look at both investments being made in the REGION (not just town) as well as dis-investments so to speak. Here is a link on the first significant foreign investment ever to occur in the State of Idaho, a $64 million malted barley plant in Idaho Falls made by the Mexican company Grupo Modelo. It is interesting to note that even though Grupo Modelo is a Mexican company, it is more than 50% owned by Anheuser Busch. The tangled, multi-national corporate web we weave...

    http://www.foodprocessing-technology...rojects/grupo/

  15. #15
    Cyburbian mgk920's avatar
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    Quote Originally posted by Follow the $$
    And back to NAFTA.... communities need to look at both investments being made in the REGION (not just town) as well as dis-investments so to speak. Here is a link on the first significant foreign investment ever to occur in the State of Idaho, a $64 million malted barley plant in Idaho Falls made by the Mexican company Grupo Modelo. It is interesting to note that even though Grupo Modelo is a Mexican company, it is more than 50% owned by Anheuser Busch. The tangled, multi-national corporate web we weave...
    I wonder if that means that A-B is planning on moving some of their malt production from their massive malting plant in Manitowoc, WI?

    Mike

  16. #16

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    Quote Originally posted by Follow the $$
    And back to NAFTA.... communities need to look at both investments being made in the REGION (not just town) as well as dis-investments so to speak. Here is a link on the first significant foreign investment ever to occur in the State of Idaho, a $64 million malted barley plant in Idaho Falls made by the Mexican company Grupo Modelo. It is interesting to note that even though Grupo Modelo is a Mexican company, it is more than 50% owned by Anheuser Busch. The tangled, multi-national corporate web we weave...

    http://www.foodprocessing-technology...rojects/grupo/
    I've read somewhere that almost ALL of the Mexican economy's recent "growth" is controlled by American multinationals, which have over the years killed off any locally owned competitors. Further, the number of companies listed on the Mexican Stock Exchange have dropped, as formerly Mexican owned companies have become subsidiaries of El Norte. Not sure of the source, though, so take this with a grain of salt.

  17. #17
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    Quote Originally posted by BKM
    I've read somewhere that almost ALL of the Mexican economy's recent "growth" is controlled by American multinationals, which have over the years killed off any locally owned competitors. Further, the number of companies listed on the Mexican Stock Exchange have dropped, as formerly Mexican owned companies have become subsidiaries of El Norte. Not sure of the source, though, so take this with a grain of salt.
    Well, one Mexican company, CEMEX, has taken over some large cement plants in the US..the one in Kosmosdale outside of Louisville, and one near Dayton.


    And back to NAFTA.... communities need to look at both investments being made in the REGION (not just town) as well as dis-investments so to speak. //
    Thats what I was talking about about the tool & die industry fading due to offshore competition. This is a regional industry in SW/W Ohio, which actually paid well. As this industry is going away the consequences are downward mobility and ramifications in other economic sectors, like retail trade, as well as outmigration as unemployed tood & die makers and machinests leave the region....they are downwardly mobile but are experiencing this perhaps outside the area.

  18. #18
    Cyburbian
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    Don't forget about us

    Here's another result of NAFTA. A booming export economy in southern Ontario , and consequently lots of jobs, population growth, and urbanization.

  19. #19
    Cyburbian nerudite's avatar
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    NAFTA makes me work permit process much easier each year. But also, NAFTA has contributed to the 'brain drain' in Canada, as now it is easier for highly trained professionals to head south for better pay/lower taxes.

  20. #20
    Cyburbian jresta's avatar
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    Quote Originally posted by Luca
    FYI, I can tell you that any serious economist could just tear to shreds much of what is in that link, but don't have the time right now.
    serious economists . . . by which you mean "classical economists"?

    . . . which is another way of saying "neo-liberal economists"

    Let me quote at length here because i think it's important to this discussion -

    "The theory of the market economy traces back to the Scottish economist Adam Smith (1723-1790) and the publication of his Inquiry into the Nature and Causes of the Wealth of Nations in 1776. Considered by many to be the most powerful and wonderfully democratic ideal of a self-organizing economy that creates an equitable and socially optimal allocation of a society's productive resources through the interaction of small buyers and sellers making decisions based on their individual needs and interests.

    "Market theory, as articulated by Smith and those who subsequently elaborated on his ideas, developed into an elegant and coherent intellectual construction grounded in carefully articulated assumptions regarding the conditions under which such self-organizing processes would indeed lead to socially optimal outcomes. For example,

    "- Buyers and sellers must be too small to influence the market price.

    - Complete infomration must be available to all participants and there can be no trade secrets.

    - Sellers must bear the full cost of the products they sell and pass them on in the sale price.

    - Investment capital must remain within national borders and trade between countries must be balanced.

    - Savings must be invested in the creation of productive capital

    "There is, however, a critical problem. As international financier George Soros has observed: 'Economic theory is an axiomatic system: as long as the basic assumptions hold, the conclusions follow. But when we examine the assumptions closely, we find that they do not apply to the real world.' Herein lies the catch: the conditions of what we currently call a capitalist economy directly contradict the assumptions of market theory in every instance."

    That's from David Korten's book "The Post-Corporate World" and should anyone question his credentials, he earned MBA and PhD degrees from Stanford's Graduate School of Business and tought at Harvard's Graduate School of Business. He served as a Ford Foundation project specialist in Manila and as Asia Regional Advisor on Development Management to the US Agency for International Development.

    Essentialy, i think classical economics are for people who can conveniently forget the chapter in Econ101 about negative externalities. You can't clearcut a forest, sell the timber, and add the profit to your GNP. It's not accurate or honest. You lost topsoil, you lost flood protection, you lost water quality, you probably killed a ton of fish with the runoff (which will effect someone else's livelihood and/or food supply), and there are probably plenty of other negative effects on the local and regional economy that i'm not mentioning.

    The same goes for other aspects of "voodoo economics" that makes things look great on paper but has serious but as yet uncalculated consequences. I would surmise that the reason that it's uncalcuated (because it's not as if it hasn't been measured) is because the present situation works extremely well for the few million people in the world that are the beneficiaries of such "reform."

    As NAFTA propelled Mexican immigration well, here comes CAFTA and the Central Americans. It's generally smart to wait until one large immigrant group has a solid foothold in the middle class before you invite another one to supplant them.
    Indeed you can usually tell when the concepts of democracy and citizenship are weakening. There is an increase in the role of charity and in the worship of volunteerism. These represent the élite citizen's imitation of noblesse oblige; that is, of pretending to be aristocrats or oligarchs, as opposed to being citizens.

  21. #21
    The benefits of international trade tend to be large aggreggates of minor improvements, which is why they can be invisible to people while the structural changes are very visible. Big job cuts make the news more often than new products on the market. But keep this in mind, international trade is really no different from interregional or interurban trade. Do you mind that Detroit sells cars to Los Angeles? What difference is it to you if Tokyo sells cars to Los Angeles instead? If they make better cars in Tokyo, Angelenos are better off getting their cars from them. Protecting Detroit makes no sense, it will only ensure lower quality products. Low quality has been the norm in every country that flirted with heavy protectionism this century.

  22. #22
    Cyburbian jordanb's avatar
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    The difference is huge because there is no communal government in place between Los Angeles and Tokyo. So, for instance, there's no mechanism through which the people of Los Angeles can force the manufactures in Tokyo to cut down on Mercury production (for instance). That's not a problem in the case of Tokyo because Japan tends to have stricter regulations than the United States anyway, but when you consider Mexico, or (for goodness sake) China, you can see how the ability for capital and goods to cross borders that regulations can not can cause big problems.

    The same problem can present itself within a federal system like the United States, as exemplified by so-called "right to work" statutes that many worker-hostile states implement to try to attract jobs from states with more organized workforces. The only way for such practices to end would be for the Federal government to step in because the states that are getting shafted have no legal recourse.

    In general, expanding the scope of an economy will improve efficacies, and that's good for consumers because it means that they'll be able to consume more for less cost. But those efficacies will come at a great cost to workers, who will have to deal with a more volatile and cut-throat labor market. Because most of us are all both consumers and workers, you can see that the benefits of such actions can often be lukewarm or even detrimental for the vast majority of the population.

    But things get even worse when capital and goods are allowed to easily cross jurisdictional boundaries that regulation can not, because then local control of the functions of the economy (through for instance, environmental and labor regulations) is eroded. With unregulated international trade, you add in a completely new dimension. Not only is local control eroded, but effective control by anyone is eroded.

    This is not the result of the nature of international trade, because treaties could be written to allow such regulation, but in fact is a result of the reality that the international trade treaties are being written by people who clearly are trying to allow companies use free trade to completely circumvent regulation of any sort. A good example is the provision in NAFTA that allows companies to sue governments for passing laws that hurt their business.

  23. #23
    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by jaws
    The benefits of international trade tend to be large aggreggates of minor improvements, which is why they can be invisible to people while the structural changes are very visible. Big job cuts make the news more often than new products on the market. But keep this in mind, international trade is really no different from interregional or interurban trade. Do you mind that Detroit sells cars to Los Angeles? What difference is it to you if Tokyo sells cars to Los Angeles instead? If they make better cars in Tokyo, Angelenos are better off getting their cars from them. Protecting Detroit makes no sense, it will only ensure lower quality products. Low quality has been the norm in every country that flirted with heavy protectionism this century.
    Are there not auto plants that Angelenos work for that are american owned or co-owned? Are not most Honda Accorda and Toyota Camarys as well as nearly every 'Japanese' brand SUV made in the US? This makes a big difference. Auto jobs pay very well those jobs support local economies. Most of the Japenese companies are now what you narrowly define as "Detroit" as they have american suppliers, american workers, american research and development labs, and even built on american soil. Using your logic Chrysler products = Germany, while this is partly true it is not a correct assessment of the marketplace.

    China has no protectionism, but they sure make a lot of crap. International trade, while free, is not the same as fair trade. What are we shipping (besides jobs) over to places like China? Like I want a Cheri auto that is proposed by China for sale in the US for $6,000??? I'm sure they will sell great for a while like the Yugo did (then people realized what unsafe piles of crap they are). You're arguement does not hold water.

  24. #24
    Cyburbian
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    Quote Originally posted by jordanb
    But things get even worse when capital and goods are allowed to easily cross jurisdictional boundaries that regulation can not
    jordan's comments are right on and fit AMPAD's situation perfectly. Mattoon offered AMPAD every incentive we had to get them to expand here. But how can you compete with no EPA, no OSHA, no BS permits for XY and Z?

  25. #25
    Quote Originally posted by jordanb
    The difference is huge because there is no communal government in place between Los Angeles and Tokyo. So, for instance, there's no mechanism through which the people of Los Angeles can force the manufactures in Tokyo to cut down on Mercury production (for instance). That's not a problem in the case of Tokyo because Japan tends to have stricter regulations than the United States anyway, but when you consider Mexico, or (for goodness sake) China, you can see how the ability for capital and goods to cross borders that regulations can not can cause big problems.
    This is a problem but one that tends to be a main focus of trade treaty. There's also nothing wrong with requiring foreign goods to adhere to your standards in order to be sold legally in your market. It's done all the time, and the benefits often spread to the producing country as it rarely pays to run factories on two standards of production. The problem with Mexican and Chinese abuse of workers and the environment is that there is no political will to reign in those abuses, both on the part of the local governments as well as the US. And let's face it, how many regular Walmart client cares about the production conditions of the goods they are buying?

    The problem here is people and politics, not anything having to do with international trade.
    In general, expanding the scope of an economy will improve efficacies, and that's good for consumers because it means that they'll be able to consume more for less cost. But those efficacies will come at a great cost to workers, who will have to deal with a more volatile and cut-throat labor market. Because most of us are all both consumers and workers, you can see that the benefits of such actions can often be lukewarm or even detrimental for the vast majority of the population.
    Benefits of trade cannot be both improvements and detrimental to the vast majority of the population. It's the same group of people. Of course some workers will be displaced by trade liberalization, but that's true of any effort to increase productivity in the economy. These workers are always a minority. Without increases in productivity, you can't have economic growth, and you can't improve the lives of the population. Trade liberalization for workers has exactly the same effect as technological innovation. We actively encourage technology and science with public subsidy even though it causes displacement, it doesn't make sense to conduct protectionism for hypocritical reasons.
    But things get even worse when capital and goods are allowed to easily cross jurisdictional boundaries that regulation can not, because then local control of the functions of the economy (through for instance, environmental and labor regulations) is eroded. With unregulated international trade, you add in a completely new dimension. Not only is local control eroded, but effective control by anyone is eroded.

    This is not the result of the nature of international trade, because treaties could be written to allow such regulation, but in fact is a result of the reality that the international trade treaties are being written by people who clearly are trying to allow companies use free trade to completely circumvent regulation of any sort. A good example is the provision in NAFTA that allows companies to sue governments for passing laws that hurt their business.
    Many trade treaties are established to protect for local jurisdictions. The treaties of the European Union protect small countries while allowing for a very dynamic European common market. This was made necessary since the EU is at its core a union of minorities. That the US tends to strong-arm treaties to its advantage reflects the political corruption of the US and not any fundamental problem with trade liberalization.

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