In the case of protectionism, the winners are domestic producers and unskilled workers in the import competing industries and the losers are the consumers. In the case of free trade the winners are the consumers and export industries and the losers are domestic producers in import competing industries and unskilled workers. An important point to be noted here is that the workers who work in protected industries are also consumers in that economy and will be affected by the higher prices of goods and reduction in trade. Since trade benefits consumers in terms of reduced prices of goods, the workers who earn a low income due to a decline in the aggregate demand for domestically produced goods in the import competing industries will also be relatively well off. This shows us that both free trade and protectionism have pros and cons and have different effects on different factors of production in an economy but the bottom line is the benefits from free trade exceed the benefits of protectionism and hence we can argue that the threat of unemployment or decline in real wages does not provide a valid argument for governments to employ protectionist
The imposition of tariffs generates deadweight loss of both producer and consumer surplus. The welfare of both parties is reduced. It leads to production inefficiencies meaning producers that are safeguarded by the government have little to no incentive to reduce their cost of production leading to higher average costs and x-inefficiency. Protectionism causes trade wars between countries. If one imposes trade barriers on the imports of another country’s goods, the country will face retaliatory action by another.
94 words A ) Discuss the forms of restriction on international trade. There are quite a number of trade restrictions that a government can implement on imported goods in order to protect domestic industry, such as tariffs, quotas, embargo, safety standards regulations, Anti Dumpling, complex custom duties, labeling requirements and quality restrictions. Tariff refers to tax placed on foreign goods which raises the price of the imported goods as it enters the country. This is the most common form of barrier to trade. Through tariff imposed on imported goods, this will lead to an increase in government revenue as well as protection on domestic industry.
Country will produce extra units of goods, which it has comparative advantage, to export and soon they become specialize in producing them. Not all sectors have comparative advantage, as country open up for trade, other countries will also try to export their goods into your country too. If other countries goods are cheaper, people will stop buying it from local firms and only buy import products. Firms that have higher cost will be driven out of the market which leads to the problem of unemployment and inequality.
Regulations that the government implement, licensing for example, increases the barrier of entry into the market and decreases ways for the traders to gratify consumer demand. This case is prevalent in the monopoly market. The market is sometimes best to decide how much and what to produce since it has better information and knowledge of the consumers compared to the government. Economic decisions may also not be competent when the government is motivated by political power rather than economic imperatives. Sometimes, economic policies are designed to retain power rather than to ensure maximum efficiency in the economy.
The formation of global commodity chains exemplifies how globalization interconnects national economies. On the one hand, these chains vastly decreased the prices of numerous products as well as stimulated the economies of several developing countries. On the other hand, they resulted in price wars that pushed suppliers to depress wages and labor conditions for the sake of cost-efficient competitiveness. Divided on how to approach poor labor conditions, a number of scholars expressed opposing views on the imposition of global labor standards as they have various consequences for the poor. While U.S. companies promote labor rights in sweatshop nations, their resolutions are merely public relations strategy and as a result, even something as
(2). Basically, our country is more concerned with how much we're spending rather than creating and saving. It's disappointing to learn that those are the aspects that are being measured. Although the main concern is profit for companies to excel, the other factors should still be measured equally. Another quote by Derakhshani claims that, "A consumer economy only works if consumption of goods provides only temporary pleasure.
This obviously increases costs of firms. Fixed costs that exporters face with due to standardization discourage them in accessing foreign markets and reduces variety of the products exported by non-EU countries (Shepherd, 2007). One of the solution to such inefficiencies is harmonization of international standards among nations. That can be sustained if there is a coordination between countries in implementing trade policies. However, countries should also consider the negative effects of harmonization of standards on product
This is due to the low barriers of entry in the clothing industry. Next, the implementation of goods and services tax by the government is also a threat to Muji. When the taxes are implemented by the government, it increases the prices of goods and therefore the overall cost of production of the products will increase as well. (One More) Weaknesses to Strength Muji can improve their weaknesses by having a set of strategy. As for high price, we should try to control the cost of the product in order to bring down the price of the product without compromising on the profit margin.
Economies of scale; producers can benefit from the application of scale of economies which will lead to lower costs and lower prices for consumers. Employment opportunies; jobs may be created as a consequence of increased trade between member economies Protection; firms inside the bloc are protected from cheaper imports from outside, such as the protection of the EU SHOE INDUSTRY from cheap imports from China and Vietnam. THE MAIN DISADVANTAGES OF ECONOMIC BLOCS Loss of benefits; The benefits of free trade between countries in different blocs is