preview

International Trade and Protectionism

Satisfactory Essays
International Trade and Protectionism
The benefits of globalization and open trade to any country’s economy are immense since international trade agreements and unilateral liberalization allow for the adoption of low tariffs. However, these benefits do not cut across the entire economy and it is often the case that special interest groups are perpetually attempting to use government power to shield themselves from competing imports. The mechanism these interest groups use to enforce such policies is often termed regulatory protectionism (Sykes 24). This has seen the proposal and implementation of numerous policies aimed at guiding consumer purchases towards permitted goods and services. The intension of such policies is to overcome an assumed inadequacy of the free market to create the highest social benefit in a market economy. These regulations are often molded by public health or environment concerns.
Protectionism is on the rise due to the increasing need for relief from the pressure imposed on local businesses by imports. The belief that other countries participate in unfair trade practices and the current macroeconomic performance have also led to an increase in protectionism. Import competition is of concern because countries like the United States are continually becoming more dependent on international trade. The inevitable consequence of this trend is that an increasing proportion of the labor force will be dependent on world trade for employment. It is also worth noting that an increase in international trade affects certain sector disproportionately. The call for protectionism can therefore be traced directly to the decreased performance in several major industries. The shifts in comparative advantage are responsible for losses resulting from international competitiveness. One may argue that such shifts benefit the general economy by putting resources to more productive use. However, they are immensely costly in the short run and these costs must be forestalled by implementing protectionist measures.
Despite the fact that some sectors have reaped immense benefits from international trade, a few have not done so well in that respect. In the United States, such industries include apparel and textiles, footwear, electronic goods, basic steel and iron and motor vehicles. In these sectors, other countries have comparative advantage in view of the fact that production techniques in these areas have become fairly standardized meaning that relatively unskilled workers are more than capable of producing these goods. Over time, higher domestic wages have made the cost of production in the United States uncompetitive meaning that capital has inevitably moved to countries with lower wages.
Get Access