Domestic and Global Protectionist Policies Affecting Economies
ECON 504 – Final Paper
Domestic and Global protectionist policies affecting economies
Throughout the global economy, there are free trade zones and there are restricted zones. Free Trade exists when there is an absence of government imposed barriers in existence between nations in order to restrict trade. When barriers such as those referred to as protectionist policies exist, free trade becomes restricted. Protection is essentially defined as any action by national governments that will give an artificial competitive advantage to domestic producers at the expense of foreign producers. National governments aim to protect their nation from the disadvantages of free trade, through protectionist policies in the form of subsidies, tariffs, local content rules, quotas, export incentives and voluntary export restraints. Reasons for protection include “The Infant Industry argument” which states that some industries in a given country may develop a comparative advantage if only they are sheltered from foreign competition for a while, by means of temporary protection. So if in the future, the infant industries ‘grow up’ and form a comparative advantage, the domestic economy will gain access to a larger demand market, creating an injection into the economy, resulting in increased economic activity and employment. The domestic protection argument states that free trade and increased global competition can result in structural unemployment. Therefore, it has become apparent that infant industries need to be protected, dumping prevented, domestic employment sustained and the defense and self sufficiency of a nation ensured.
The infant industry argument outlines the need for protection in order to establish industries that can form a comparative advantage in the future, if sheltered from competition for a little while. This ultimately leads to a reduction in free trade, which would otherwise have brought the advantage of imports and advanced
Domestic and Global protectionist policies affecting economies
Throughout the global economy, there are free trade zones and there are restricted zones. Free Trade exists when there is an absence of government imposed barriers in existence between nations in order to restrict trade. When barriers such as those referred to as protectionist policies exist, free trade becomes restricted. Protection is essentially defined as any action by national governments that will give an artificial competitive advantage to domestic producers at the expense of foreign producers. National governments aim to protect their nation from the disadvantages of free trade, through protectionist policies in the form of subsidies, tariffs, local content rules, quotas, export incentives and voluntary export restraints. Reasons for protection include “The Infant Industry argument” which states that some industries in a given country may develop a comparative advantage if only they are sheltered from foreign competition for a while, by means of temporary protection. So if in the future, the infant industries ‘grow up’ and form a comparative advantage, the domestic economy will gain access to a larger demand market, creating an injection into the economy, resulting in increased economic activity and employment. The domestic protection argument states that free trade and increased global competition can result in structural unemployment. Therefore, it has become apparent that infant industries need to be protected, dumping prevented, domestic employment sustained and the defense and self sufficiency of a nation ensured.
The infant industry argument outlines the need for protection in order to establish industries that can form a comparative advantage in the future, if sheltered from competition for a little while. This ultimately leads to a reduction in free trade, which would otherwise have brought the advantage of imports and advanced