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Trade agreements allow companies to sell their products and services in other countries with little or no restrictions, depending on the agreement's terms. Think of some of your favorite products that come from another country. Most of them are possible due to trade agreements at some point in the process, and those agreements allowed the company to produce a quality product at a competitive price. Trade agreements have generated opportunities, but they have created challenges in some industries and countries. Jobs have become concentrated in lower-wage countries, which produce products that are then sent back to higher-wage countries through trade agreements. Read this section and then complete the questions at the end. 

Self-Check Questions

  1. Explain how trade barriers save jobs in protected industries, but only by costing jobs in other industries.
  2. Explain how trade barriers raise wages in protected industries by reducing average wages economy-wide.
  3. How does international trade affect working conditions of low-income countries?
  4. Do the jobs for workers in low-income countries that involve making products for export to high-income countries typically pay these workers more or less than their next-best alternative?
  5. How do trade barriers affect the average income level in an economy?
  6. How does the cost of "saving" jobs in protected industries compare to the workers' wages and salaries?