International Trade (Protection) Australia Essay

803 words - 3 pages

Protection:*Free trade enables greater competition, higher quality goods, economic growth and lower prices.*Free trade increases real incomes as prices are lower and consumers buying power will be increased.Through specialization countries can produce outside their PPFArguments for protection:*Protection benefits small developing industries whereas free trade benefits the general public*Governments can us protection to gain political advantage-they 'buy' votes from the industries they protect*Cost of protection for the PMV and TCF industries amount to over 2 billion a year; this is 2 billion that consumers do not have to spend on other goods and servicesThe infant industries argument:New developing industries require protection in early years until they mature and can take advantage of economies of scale. These industries should then naturally become internationally competitive and develop a comparative advantage. This is often not the case as the industries become accustomed to the lack of competition and the protection becomes long term rather than short term. Infant industries protection can be justified as long as the level of protection is reduced over timeThe diversification argument:If comparative advantage was fully adopted and countries specialized in only a few industries (placing all industries in these sectors) then changes in the world's demand and price would have a huge effect on the economy. So it is better to diversify industries and thus resources, so as to not 'place all of one's eggs in the same basket'. In this case protection is needed to start up the industry and as the industry becomes more competitive the level of protection can be decreased.Anti-dumping argument:Dumping is when an overseas firm sells products in a country below its cost of production in an effort to drive out the domestic producer. These firms may be large enough to sustain short-term losses or may have surpluses they need to get rid of at and price. It is hard to tell when dumping is occurring as foreign goods may be priced lower due to production efficiencies. If dumping occurs then temporary protection may deter this type of activity.National defense argument:It is said that it is important to protect 'vital' industries (industries that consumers need to stay alive or function normally) in case of a wartime emergency. It is important to remember that international trade creates strong international cooperation so trade can only benefit this argument. Nations should rather stock pile imported produce incase of a problem arising in the future.The increased employment argument:This argument assumes that buying imports employs foreign workers and buying...

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