Free Trade vs Protectionism
One of the greatest international economic debates of all time has been the issue of free trade versus protectionism. Proponents of free trade believe in opening the global market, with as few restrictions on trade as possible. Proponents of protectionism believe in concentrating on the welfare of the domestic economy by limiting the open-market policy of the United States. However, what effects does this policy have for the international market and the other respective countries in this market? The question is not as complex as it may seem. Both sides have strong opinions representing their respective viewpoints, and even the population of the United States is divided when it comes to taking a stand in the issue. After examining all factors on the two conflicting sides, it is clear that protectionism, from the side of the United States, is the only way the American industrial economy can expand for the benefit of its citizens and for its national welfare.
The economy needs to get itself out of the huge deficit hole that it has created for itself,and lean towards protectionist measures.
The dictionary definition of free trade states it as a policy of allowing people of one country to buy and sell from other countries without restrictions. This idea originated with the influential British economist, philosopher, and author of The Wealth of Nations, Adam Smith. He inspired the writings of great economists such as David Ricardo, Karl Marx, Thomas Malthus, and others. According to Smith, specialization and trade is the best solution to create a flourishing American economy, with its industries ruling the economic world.
William H. Peterson, holder of the Lundy Chair of Business Philosophy at Campbell University, agrees with Smith’s philosophy. He states that the idea of free trade allows the efficient use of economic resources and will promote international cooperation.
One of the biggest examples of international cooperation is the Bretton Woods
system that originated from a 1944 conference at Bretton Woods, New Hampshire. Those
participants in this conference created three organizations to help regulate the international economy. The first is the International Monetary Fund (IMF) which was established with the idea of regulating monetary policy. One of the benchmarks of the IMF is the stabilization of exchange rates and the loaning of money to help stabilize countries with balance of payments deficits. The second organization established was the General Agreement on Tariffs and Trade (GATT) whose main focus was on a liberal trading order.
Their mission was to reduce trade barriers on manufactured goods and to build-up the principle of most-favored nation (MFN) status. This would impose a sense of fairness
between countries in that each was required to levy the same low tariffs on each others
imports. The third and final organization sponsored by Bretton Woods is...