Last week I wrote about free trade and the issues that sometimes complicate so called “Free Trade” agreements. This week, I’ll comment and focus on three very critical pieces that can either make or break any “Free Trade” agreement.
The first issue I’ll focus on is environmental rules and regulations. On December 2, 1970 under President Nixon, the United States created the Environmental Protection Agency, (EPA). The agency is responsible for protecting health and the environment through the writing and enforcing of environmental laws and regulations passed by the U.S. Congress. Developing nations around the world have similar environmental rules and regulations. However, quite often economic growth becomes more of a priority and those environmental rules and regulations take a back seat. Not so here in the United States. The EPA, since its inception has expanded its jurisdiction to include the Clean Air Act, Clean Water Act, Toxic Substances Control Act, Chemical Safety Information, Site Security and Fuels Regulatory Relief Act, Federal Food and Drug Act and the Occupational Safety and Health Act. While most people would agree that it’s necessary to keep our environment clean, the reality is that it can become an additional financial burden for some U.S. companies to do business in the U.S.
The second issue causing headwinds for U.S. businesses is U.S. Labor Law. The National Labor Relations Act of 1935 was created, in part to set the rules between employees and employers and to correct the “inequality of bargaining power.” Since 1935 labor laws have broadened to include other such regulations as child labor laws, prison labor law, workplace safety & health laws, workers’ compensation, The Family and Medical Leave Act, Veterans’ Preference, safety & health, the Equal Employment Opportunity Commission and many more. Again, while many people would agree that these regulations may be necessary, in many instances they have become an additional financial burden on American businesses. Many of our global competitors do not have the same regulatory burden as U.S businesses and thus the U.S. is put at a clear disadvantage.
The third and final piece of this complicated puzzle is what some perceive as currency manipulation on the part of some of our competitors. If all other areas of a “Free Trade” agreement between countries are equal, one trading partner could begin to gain an advantage simply by devaluing their currency and as a result causing that country’s currency to be significantly cheaper and more attractive to foreign investment.
As you can see, it’s not always one issue such as tariffs that make up a “Free Trade” agreement. These agreements can be complicated. In the end, it’s always about trusting the other trading partners and whether or not they’re holding up to their end of the agreement.