Free trade is meant to encourage trade and commerce by removing the various trade tariffs and making it possible for traders from all over the world to become more competitive. It is but natural for various countries to become more protective of their own products and hence the need for a centralized agency to monitor, regulate and to arbitrate in all trade-related disputes. That’s the reason why the world trade organization was created in the first place. But despite several free trade agreements being inked between several nations under the aegis of WTO, the negative effects of such agreements became more apparent over the decades.
Lowered wages: Free trade agreements essentially imply that two or more nations are willing to remove various trade barriers, adjust or remove various trade tariffs so as to enable traders from these nations to be able to compete more effectively with each other. As a result, most free trade agreements are often viewed as a race to the bottom, where companies slash prices all across the board in order to compete effectively with others. As a result, most of these companies offset the basement prices by slashing wages and even forcing their workers to work in unhealthy and unsanitary conditions. Even a few US companies had recently been fined for the same, case in example, the Maquiladoras.
Illegal immigration: A few companies have started to employ illegal immigrants since they would not have any legal protection and that the company in question can pay them below the legal minimum wage. Hiring illegal migrants also means that the company would not have to pay any tax either. Surprisingly most companies attempt to hire illegal migrants and utilize the various benefits in order to compete more effectively on the global market.
Child labor: As local companies slash wages in order to make their products more competitive in the global market, one of the unexpected byproducts of such a move was the renewed focus on child labor with more children being hired than ever before. Child labor is illegal but local governments often lack the adequate manpower to prevent the same. One reason why children are hired in place of adults is that they are nimble and are only paid half of what an adult worker earns.
Environmental damage: As local farmers attempt to compete effectively with their counterparts across the world, there is a renewed focus to increase the production yield. As a result, more tracts of forested land and natural habitats are being cleared across the world at an alarming rate. A recent study highlighted the fact that several species, both flora and fauna face an immediate threat of extinction as a result of the loss of their natural habitats. And if this continues the same way, then our environment and even our way of life would be in immediate danger.
These are some of the negative effects of free trade and more often than not, it is the underdeveloped nations that had to pay the price of entering into a free trade agreement with a developed nation.