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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.
Protectionism is the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports. Between 2000 and 2008 the value of world trade in goods and services rose by 12% a year. However since the global recession in 2008 the value of world trade in goods and services has substantially decreased.
Trade is the most common form of transferring ownership of a product. The concepts are very simple, I give you something (a good or service) and you give me something (a good or service) in return, everyone is happy. However, trade is not limited to two individuals. There are trades that happen outside national borders and we refer to that as international trading. Before a country does international trading, they do research to understand the opportunity costs and marginal costs of their production versus another countries production. Doing this we can increase profit, decrease costs and improve overall trade efficiency. Currently, there are negotiations going on between 11 countries about making a trade agreement called the Trans-Pacific
When people in America see foreign goods for outrageous prices and then they see American goods for normal prices, they are going to buy American products. Unfortunately, this is not the only effect of a protectionist policy. Foreign nations often get upset at the increase in American tariffs and respond by increasing their own tariffs on American goods. This weakens the sales of American goods to foreign nations. In order for the United States to have a favorable balance of trade, then they must have strong exports.
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
In the acclaimed novel, The Choice: A Fable of Free Trade and Protectionism, author Russell Roberts, an economist and writer, tells a fictional story that enlightens readers to the wonders of the economic system. Russell provides an insightful, thought provoking story that illustrates protectionism and free trade, while making the concepts and arguments easy to comprehend.
The U.S. industries have been outsourcing manufacturing for several decades now. U.S. companies thought they were reducing costs by outsourcing development, manufacturing, and process-engineering abilities. Consequently, U.S. corporations’ knowledge, skilled workers, and supply chain, which are the necessities to producing advanced products, have vanished. For example, almost all notebook computers, cell phones, and handheld devices, which were once created in the U.S., are now designed in Asia. When a major U.S. company outsource, it pressures their rivals to do the same thing. They also lose the expertise of process engineering, which would interact with manufacturing on a daily basis. Minor companies and skilled workers go to where the jobs and knowledge networks are no matter where they are geographically in the world. This decline of trade in the U.S. has caused a negative chain reaction to their suppliers of sophisticated materials, tools, production equipment, and components. U.S. industries do not have a way of coming up with new ideas for the next generation of high-tech products...
American companies purposely make their goods in other countries such as India because their labor practices do not meet US standards and can easily be manipulated for maximum profit. By paying their employees extremely low wages, they are still able to manufacture their products. As a result they pull out more profit that does not have to be given back to their employees due to minimum wage laws not being in effect in these countries. In “Distributional Effects Of Globaliz...
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
...stinguish that a qualitatively new type of worldwide trade was developing. The illustration in United stated since the late of 1980 showed that “has less productive portions moved offshore which lead to a decrease in employment while maintaining higher value-added parts. Consequently, all the productivity has risen, while the tradable sector has increased employment” (Spence and Hlatshwayo,2011).
...es currently does possess an enormous trade deficit, but the importance of this problem and the best means of solving it is a sharply debated issue. Clearly, while a return to protectionist policy would have some positive effects in the short run, it ultimately would undue the enormous growth that free international trade has caused for the US economy. The more moderate approach, of increasing domestic capital, reducing reliance upon foreign money and goods, and reducing government spending, deals with the situation much more effectively. A deficit is often times natural, especially in a wealthy country with a very strong economy, such as the US. Using these techniques, the negative aspects of the deficit can be overcome, while still ensuring the efficiency and affectivity of a liberal international trade system.
And even though the tariff barriers have been reduced significantly, but the other barriers still exist. The developing nations have argued that the protectionist trading policies of developed nations is being an obstacle against the industrialization of many developing nations. Accordingly, developing nations have sought a new international. trading system with improved access to the market of developed nations. Some of the problems that the developing nations faced have been unstable export markets. Deterioration of terms of trade, and limited access to the market of developed.
First, states can obtain benefits from free trade policy because of the elimination of tariffs and subsidies. Supporters of free trade advocate the elimination of tariffs and subsidies oppose regulation that force companies to pay extra for doing business in foreign markets. A main principle of free trade is non-intervention from the government. Under free trade policy, uncontrolled or unrestricted access to economy allows states to open up of all international markets, and this makes all states equal competitors on the same level (Balaam and Dillman, 2011b). Many people argue that free trade is beneficial to the development of states’ economy because domestic companies do not have to pay extra taxes and tariffs in order to trade their products internationally. Free trade also brings more money into the local economy. As entrepreneurs who sell their products to
...y supply and this causes the collapse in the U.S. and elsewhere (Pinnell, Lecture notes, 3/23). Consequently, countries become very protectionist to protect firms at home and international trade collapses (Pinnell, Lecture notes, 3/23). Therefore, states must make decisions with reciprocity and consequences in mind (Pinnell, Lecture notes, 3/23).
Globalisation has been one of the most significant developments of the last half century, and issues such as trade and international commerce have become increasingly important. In consequence, problems such as poverty, unfair wages and poor working conditions in third world countries have been drawn to the attention of consumers (Hayes and Moore, 2007). This is a growing global issue which cannot be ignored by anyone concerned about the problems in developing countries. Free trade and Fair Trade have both been offered as solutions to these issues.
Moreover, international trade can be more effective in reducing poverty than outright aid in which trade can help any country become self-sufficient, rather than relying on foreign assistance. However, there are, many disparities within the present global trade system that work against poor countries. That is regulated by a set of rules created by governments over the years. In general, poor countries don't have access to developed countries’ markets because of the barriers of trade and agricultural. It’s difficult for poor countries, because of trade barriers, to sell their products abroad and develop their living conditions. While free trade benefits everyone, governments sometimes aim to protect their goods and markets by providing subsidies to local rules and producers, or creating barriers like tariffs and quotas. This particular practice is known as Protectionism; which can be identified as the economic policies and procedures of controlling trade between states...