Free Trade vs. Nafta/Cafta/Ftaa

Some people try to attach Nafta, Cafta and Ftaa to free trade. They are not free trade (especially with the riders attached that benefit 'entrenched interests') and the differences are very important in how they should be viewed. These agreements (Nafta etc.) are preferential trade agreements and will not necessarily lead to either benefit or free trade. It could be the case that by adopting a even level of protection to countries outside the preferential trade agreement (and lower or zero tariffs within) that prices of goods increase rather than decrease. To see how, look at a standard good (as economists say, a 'widget'). Assume that it can be produced for $8 in Mexico and $5 in China. If the original tariff is $6 per widget on imports from any country into the U.S. then the cost of each widget in the U.S. will be $11 for the one from China and $14 for the one from Mexico. If the tariff on imports from Mexico drops to $0 when the preferential trade agreement is signed while the tariff on Chinese imports stays at $6 per widget, then widgets will be imported from Mexico at a cost of $8 (rather than China where the cost with tariff would be $11). In this case, the more efficient producer is effectively shut out of the U.S. market in favor of a higher cost producer. This problem would not be an issue under free trade. Under free trade, the U.S. would import the widget from the lowest-cost producer and would reap the gains from this efficiency (and could provide social and retraining assistance to any workers in the U.S. hurt by the import of cheap widgets from China).