The History of Tariffless Trade in the U.S.
After World War II, GATT was signed in 1947. Eventually many countries around the world joined GATT. The purpose of participation in GATT was to remove tariffs from all participating countries. This is called tariffless trade.
The Effect of Alternate Manufacturing Sites
Given multiple sites to choose from to locate a factory, management will choose the location with the lowest cost. Included in cost is wages, benefits, and the expense of safety and health regulations.
After GATT in the 1940s, manufacturers in the U.S. followed this approach and began the decades-long process of closing factories in the U.S. and reopening similar factories in poorer countries where the cost of operating the factory was lower. This is called foreign direct investment. In so doing, many Americans became unemployed and displaced. Over time, most of the displaced adjusted, however often at a lower income and benefits level than they had enjoyed with their factory job. Without manufacturing, the U.S. economy again became an agricultural and menial labor economy.
The Effect of Importing Lower-wage Labor
Given the opportunity to hire lower-wage labor for the same job, management will hire the lowest-wage labor.
From the 1970s onward several mechanisms became possible for U.S. employers to hire lower-wage labor.
One was the widespread illegal border crossing of Central Americans/Mexicans into the U.S. Since these migrants were undocumented, they couldn't demand to be paid the minimum wage, work on a safe work site, or receive benefits, because if they caused trouble, they could simply be turned in to the police and immigration enforcement agencies and deported. Most of the migrants work blue-collar/menial labor jobs. Given the chance, management would hire these cheaper migrant workers rather than domestic workers, even if it was illegal to hire the migrant workers. By paying in cash and accounting for the cash as an expense other than payroll, the employer can cover up the transaction.
Another is legislation creating special visa types such as the H1-B visa. These allow employers to bring employees into the U.S. for a maximum of usually around two years, at which time the worker must return to their home country. These workers are documented and the jobs they are brought in to do are usually white-collar jobs, so they will be paid at least minimum wage. However, just like the migrant workers, they can be intimidated by the employer, since the employer can have them deported from the country by terminating their employment. These workers are usually brought from countries with a lower standard of living than the U.S., such as India. As a result, for these workers, a wage that is lower than what would have been paid to an American worker is still substantially more than the worker would have gotten in their home country. Therefore there is a large supply of these special visa foreign workers.
In either case an American worker is either put out of work by the presence of the foreign worker, or to compete for the job, the American worker is forced to work for the lower wage that the foreign worker would take. In the case of the blue-collar/menial labor jobs, those are the jobs that exist in an agricultural economy, yet the competition from foreign workers reduces the wages for those jobs even more or increases unemployment. White-collar jobs are scarce in an agricultural economy, yet for the white-collar jobs that remain, wages are also decreased and unemployment is increased.
