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Differentiate between protectionism and free trade
Role of international trade
Role of international trade
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The following essay aims at highlighting and analyzing the main political arguments for trade intervention and the rationale behind this. Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. However, after experiencing the economic crisis that took its toll in 2008 many countries adopted a different approach in terms of trade barriers by introducing higher tariffs in order to protect domestic firms from foreign competition (Hill). Secondly, in order to better understand the implications of the political arguments for trade it is essential to highlight the main instruments of trade policy (See appendix 1). Political arguments for trade intervention are mainly concerned with protecting the interests of certain groups at the expense of other groups. Most of the time domestic firms benefit from this, while customers suffer the consequences. One of the most cited arguments for intervention is that of protecting jobs and industries from unfair foreign competition (Hill). While industries like aerospace are protected given their importance for national security, job protection appears as a result of unions and industries putting political pressure given the threat of more efficient foreign firms (Hill). Many countries achieve this by increasing the tariffs on imports of foreign products. What really happens when a certain industry is ... ... middle of paper ... ...tional Trade: New patterns of trade, production and investment. ,2nd ed., London: Routledge; Hill, Charles W.L. (2011) International Business: Competing in the Global Marketplace, 9E, McGraw-Hill Irwin. Krugman, Paul R. and Maurice Obstfeld (2003), International Economics: theory and policy, Addison-Wesley. Micik Mia (1998). International Trade. London: Macmillan Press LTD; Pomfret R. (1991). International Trade: An introduction to Theory and Policy. , Massachusets: Blackwell Powell, J.(1990) . Policy Analyis: Why trade retaliaton closes markets and impoverishes people, Cato Policy Analysis No. 143 . [Online], Available at: http://www.cato.org/pubs/pas/pa-143.html , Accessed 5.12.2013. Salvatore D. (2011). International Economics Trade and Finance. 10th Ed. John Wiley&Sons Pte Ltd. Sodersten B., Reed G. (1994) International Economics, 3rd Ed., London: Macmillan
Roberts, Russell. (2006). The Choice: A Fable of Free Trade and Protectionism. New Jersey: Prentice Hall.
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...
Globalization has changed the way that everyone conducts business. Throughout history, man has constantly increasing its scope from a local agrarian economy, to cottage industries, to domestic industry, to the newly globalized international framework of commerce that exists today. This progression is quite logical, as it ever increases the efficiency at which products are produced and services are rendered. However, when put in context, the theoretical maximization of efficiency may have dire consequences on independent nations. The over specialization of nations' industries, in the effort of globalization and efficiency, also has the effect of reducing internal commercial infrastructure. This paper examines economic protectionism, and highlights two situations in which its use is fully warranted.
Mitchener, Kris, J. "Politics and trade: evidence from the age of imperialism." Voxeu.org. CEPR, 11 April 2008. Web. 30 November 2013.
The Political Economy in International trade focuses on understanding the many causes of economic growth in developing and transition economies, the different role of international trade in increasing economic welfare around the globe, and the many different impacts of the international financial system on the global economy. As we take a look at the United States and Poland different economic systems and understand how these two countries are effected by the political economy in international trade, we will become familiar with how both are able to become skilled at improving their economic conditions in the globalized world economy. One of the most important objectives for both economies is to increase economic development and also to enhance the international economies of both countries in international trade system. As we look closely at the fundamental aspects of the international trade key point (Increasing market size, having an insurance motive, protectionism, and increasing bargaining power) we will begin to understand what makes and breaks countries in the political economic in international trading between large and small nations.
Governments tend to support the use of AD as a trade remedy measure, since AD is more attractive as a tool of ''political-support” safety valve. It has the following advantages:
In the International Business class, free trade has been the cornerstone for economic prosperity. But sometimes free trade can flood the market with cheaper products, causing financial problems for companies in this country. Often, the U.S. government will set up a tariff to help the American companies. But is this the best solution? This is the topic of the article, Bush’s China-Trade Dilemma by Neil King, Jr. published November 14, 2002 in “The Wall Street Journal.”
... numerous positive aspects of international trade, some of them include a boost in economic growth, both locally and nationally as well as creates a fairer competitive market space. The outcomes of international trade are explained throughout this essay. Also, this essay identified how monopolies in a domestic market respond to foreign competition and how they must adapt to such situations. The measures taken by government to prevent and control foreign competition are briefly explained and as to how these can work to hinder domestic markets from competition. The positive, short-term effects of trade protectionism are increased government revenue, prevention of ‘dumping’ and an increase in domestic production. Although, the long-term effects of such actions are often the opposite to the original idea of protectionism and could lead a country to economic stagnation.
The trend towards global trade liberalisation began in the 19th century, when reductions in transport and communication costs spurred trade. This continued through the Second World War (WWII), when economic agreements, such as Bretton Woods and The General Agreement on Tariffs and Trade (GATT), were formed in its aftermath which included the liberalisation of capital and goods markets and the reduction in tariffs. From 1947 to 1967, GATT negotiations reduced tariffs on all dutiab...
We begin our study of free trade by understanding the four principles of individual decision making.... ... middle of paper ... ... Edge, Ken, “Free trade and Protection: advantages and disadvantages of free trade” NSW HSC online http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html#more Accessed November 29, 2011. Net Aparijita, Sinha, “What are the disadvantages of free trade?
There are many reasons for which governments decide to interfere in the trade of goods and services. Those reasons can be economic, cultural or political. They often choose to involve themselves because the society’s economy is performing worse than expected. There are ways governments can intervene to help their nation such as inflicting different trade barriers, the common ones being tariffs and quotas.
Charles Sturt University. (2014). Free trade and protection: advantages and disadvantages of free trade. [ONLINE] Available at: http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html. [Accessed 19 April 2014].
Lin, Chung-Ming, and Chen-Kuo Lee. "Relations between Free Trade and Economic Protections: A Game Theory Analysis." International Journal of Management. 29.2 (2012): 591-603. Print.
...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).
The Liberal trade theory is considered one of the most influential international trade theories to date and is implemented by most key states and international economic organizations. The liberal theory is based on the premise of a free market approach where there is to be minimal or no political interference from governments to ensure maximum growth and efficiency, this premise is said to be market-centric. This believe advocates that “what markets work best as mechanisms for allocating resources (both domestically and internationally) if state intervention in market processes is kept to a minimum” (Broome, 2014, s. 22) (Khorto, 2014:2)