Free Trade And Protectionism Case Study

Introduction

Trading products have been used in ancient times. One of which is barter system that started way back 6000 BC and introduced by Mesopotamia tribes and adopted by Phoenicians until it became a way of people to accumulate things by exchanging goods and services and in return, goods and services will also be given with the same value. Back then, there are no complications in trading because it is simpler. Today, globalization took place wherein countries can interact to each other which means the trading system also emerged. Here comes free trade and protectionism. There are two authors that originally tackled about the free trade. One of them is Adam Smith. He pointed out the benefits of unrestricted trade or the free trade and
Why? This policy will not only protect the local businesses but will also protect the jobs of the people. Imagine having an import of a Nike shoe without any tariff or any kind of protectionism in it, of course it will be cheaper and people will appreciate the product more because it is imported and has a good reputation on its name. What will happen to local products? Maybe they will decrease their sales or worst they will be bankrupt. Also without the protectionism policy, local businesses will be forced to compete with international firms to produce the best product or services with the lowest price. Protectionism is helpful to emerging countries because they can focus more in their products than entertaining imported products. Some economists favor protectionism because it is essential in maintaining a healthy economy. There are many ways to protect the trade. One of which is to enact tariffs that tax imported goods. That alone increases the price of one imported product. This will become less competent because of its higher price than in the local market. One example of this is the new released iPhone X which costs $999 in the US market with the equivalent of Php50,607.84 but when it is imported to the Philippines, the cost ranges to Php60,000 to Php80,000. See the difference? People will be more interested with the local brands like Oppo because it has a lower price and have a good specification. Another method in protecting the country’s trade is the government subsidizes local industries. Subsidies are usually in the form of cash wherein it lowers the burden of local firms and it also gives tax reduction to them. This allows producers to lower the price of local products and services. Another trade protection is the imposing of quotas. What is a quota? This is the limitation or a fixed number of things. This so far is better than the other two mentioned earlier. No matter how low the