Trade Protectionism Put To The Test

2013 words - 8 pages

Trade Protectionism Put to the Test

The idea behind trade protectionism as policy is that domestic industry cannot or should not have to compete with imports from foreign producers and that domestic workers’ jobs are at risk when trade is unrestricted. Most economists, and a large portion of the public would agree when looking at the big picture that free trade is positive for importers and exporters, as well as consumers. The very basic theories of comparative advantage, specialization and trade make a compelling argument for trade without barriers. Trade based on comparative advantage produces higher outputs for both importers and exporters, higher quality of goods, lower prices, greater varieties of goods from which to select, and an overall greater sense of economic well-being. The disadvantages of implementing quotas, tariffs, or other forms of barriers to trade far outweigh any perceived advantages. There are cases to prove that more jobs are actually lost under protectionism than saved. Historically, trade barriers result in higher prices to consumers, higher taxes (taxes on imported goods as well as those to cover additional bureaucratic infrastructure to force compliance with trade restrictions), developing counties that have no way to repay debt as their ability to export is squashed, and trade wars that have proven a deterrent to world peace.

This paper will look at the evidence that trade protectionism has an overwhelmingly harmful effect on developing countries. It creates and rewards inefficiency in the marketplace. It benefits only special interest groups while the masses are forced to pay higher prices for lesser quality and choice. The costs (both monetary and non-monetary) far outweigh any benefits reaped from trade protectionism. Last but by no means least, with trade barriers in place, the masses (consumers, the public, etc) experience a lower general sense of well-being. They have less choice of goods for purchase while prices are distorted and their money buys less.

Trade Protection in Developed Countries and its Effects on Developing Economies

In this day and age, the international trade playing field is definitely not level among developed countries and those third-world countries struggling to get their economies up and running. These third world countries have outstanding loans issued by the IMF or World Bank. As a condition of those loans, they are often restricted from implementing any kind of trade policies of their own to protect their ability to export. What results is a trade situation where a developed country can effectively block imports by a third world economy, while the developing country has their market overrun with developed-country products. They have no means of protecting their local industries. Industries collapse. Unemployment goes up and the developing country becomes completely dependent on imports from the developed country. This trade situation has created a...

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