Some people fear that free trade will lead to inequality in some states with a history of ineffective governance. Small family business cannot compete on the global scale, so free trade is not beneficial to local businesses when it comes to profit. With reduced tariffs imposed on imported goods, foreign suppliers can easily lower their costs. And as a result, consumers will prefer imported goods and products over locally produced commodities. Free trade will lead some countries to disregard the environment when it comes to producing products and getting rid of waste materials just so they can compete in the
Running head: PROTECTIONISM ECONOMY 1 How National Economic Protectionism Helps National Economy Growth Yuhua Li Stony Brook University Abstract Key words: economic protectionism, economic growth, challenges, profit, free trade Introduction The idea of globalization has been widely adopted by the majority of states collaborating to deliver quality products at affordable prices. The wide campaign for open markets and increased relations is for the obvious reasons including specialization and increased productivity, the creation of quality commodities and innovation, and the identification of new markets is hence improving organizational sales. However,
Protectionism weakens the industry. Without competition companies cannot progress because the domestic product will reduce its quality and increase its price as it will have no competitor. If any country loses its borders other countries will do the same this decreases the economy of country. In my point of view free trade is far better than protectionism. Though protectionism has a lot of advantages but in long term protectionism has many dark aspects as it specifies the trade of the country whereas free trade opens the barriers of the trade which welcomes international investors an firms to invest in country that helps in increasing the economy of the country.
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
and McGee,R.W. 1997) “any policy that is intended to shield domestic industries from import competition (Dolan and Lindsey, 1994, p. 826)” Protectionism is merely an attempt by a countries government to restrict trade in goods and services with other countries. It’s based on a notion that imports are detrimental to an economy and its citizens. Protectionism intends to protect Domestic Industries and increase in labour wages, increase domestic production and help to solve the balance of trade issues that many countries face. (Davies,S.
IF a common man is questioned “can protectionism ever be justified” he’d probably say NO, we live in a world of globalisation and there won’t be many who agree with the term protectionism is today’s day, its mostly considered as an “economic bad” . You will easily find governments who say ‘I am in favor of globalisation’ but rarely will u ever find a nation which says “we are for protectionism” and that’s probably the most basic difference between the two. Let’s start with understanding protectionism before we debate if it’s even justifiable or not? Protectionism may be defined as (Block, and McGee, 1997) ‘Any policy intended to shield domestic industries from import competition’ Protectionism is merely an attempt by a countries government
Free trade is a very important component of ensuring that their citizens have enough economic resources or consumer goods for meeting various needs or wants. It is essential because it increases the amount of trades in and out of the country, and allows economic growth of a country. Free trade has created opportunities for various parts of economy to gain access to larger pools of resources and markets. When free trade in implemented in a country, more export and import would occur. Hence, the government needs to ensure that there is available fertile land for the plantation of cocoa trees so that the rate of production is able to cope with the implementation of free trade.
Only a few governments ‘heed the logic' of embracing free trade. According to Joan Robinson, governments seek trade amongst nations as an opportunity to earn revenue. Hence, most governments discourage free trade as it bares no returns. The imposition of a tariff contributes to government revenue, however it discourages free trade. According to 71.3% of economists, the imposition of tariffs and quotas usually reduce general economic welfare.
However, free trade cannot guarantee a country to be rapidly developed and rich because every country has different characteristics and distinctive trade-factors condition that „may‟ or „may not‟ fit the concept of free trade. So if by any chance an „incompatible‟ country forces itself to implement free trade, a loss and domestic economy-downturn is very probable to happen. And as free trade can possibly bring more harms than good to a certain country, the other option offered to the country would be implementing protectionism for its economy. Therefore in this paper; responding to a case of a country with abundant capital and land but is scarce of labors, the writer is going to discuss about the trade‟s factors endowment from the glasses of Stolper-Samuelson theorem, and whether free trade is best applied to the case. Stolper–Samuelson Theorem As the gains and loses of free trade and protectionism are relative, it is kind of unfeasible