Alex Gilliam
Midterm
1. Since the end of World War II there has been significant support, especially from the United
States, to eliminate artificial trade barriers and to support a greater liberalization of international
trade.
The expansion of free trade and the creation of trading blocs cause concern for some people.
As reported by the Congressional Budget Office, the pursuit of free trade could "divert the world
from multilateral negotiations and lead to the development of rival trading blocs." Other concerns
include: the exploitation of developing countries by industrialized countries; environmental
concerns as the production of goods overseas is not consistently regulated from country to
country; and labor concerns over fair wages and the loss of jobs from industrialized countries to
the developing countries, as well as political concerns that may influence the negotiations
between trading partners.
Multilateral and free trade agreements create benefits by increasing imports and exports of
goods. Countries are not the same in their production capabilities. Access to raw materials,
necessary levels of technological development, and education of the workforce all have an
impact on developing a product or service.
Yes, NAFTA is a trading bloc. The expansion of current trade agreements is also taking place—
as with the expansion of NAFTA into the Free Trade Agreement for the Americas (FTAA). The
U.S. market is extremely desirable and lucrative for smaller countries' exports, while also
providing access to a wider variety of goods and services from the U.S. and other potential
trading partners.
2. The recent plunge in oil prices should be — mostly — good for the U.S. economy.
Cheaper fuel brings big savings for consumers and businesses — several hundred billion
dollars since prices crashed from more than $100 a barrel to less than $30. Gasoline, diesel and
heating oil make up about two-thirds of the roughly 20 million barrels of oil consumed in the U.S.
every day. The oil price recovered from below $30 in early 2016 to over $50 by the end of the
year, there was rising confidence in the industry that crude could rise to $60 a barrel or even
higher later this year.
First and foremost, oil companies, their employees and shareholders are winners as oil and
gasoline prices rise. Producing states like Alaska, Louisiana, North Dakota, Oklahoma and
Texas also benefit because employment and tax revenues rise.
Higher prices also mean more activity in the oil fields, which helps local businesses such as
mom-and-pop services companies, construction firms that build housing, and truck dealerships.
And, of course, producing countries benefit, like Nigeria, Russia,Saudi Arabia and Venezuela –
all of which have been pressed financially in recent years. For the Saudis, there is an additional
advantage: Higher oil prices make its state oil company, Saudi Aramco, more valuable for the
initial public offering it has planned for later this year.
There is also a potential benefit for the environment. Higher oil and gasoline prices encourage
consumers to buy smaller vehicles and limit driving.
Consumers of gasoline, diesel fuel and heating oil are losers, and those with lower incomes in
the United States and abroad are affected disproportionately because fuel costs eat up a larger
share of their earnings. Restaurants, hotels and retail outlets can be hurt when consumers have
less to spend. But current oil and gasoline prices are roughly in balance, representing good
economic news over all. They are high enough to help struggling states and countries, but not
