Protectionism
International Marketing
BSAD 430-01
Protectionism: Good or Bad?
Protectionism is the economic policy adopted by some nations to restrict the flow of goods to the country by: increasing the price of imports (tariffs), restricting the quantity of imports (quota) and lowering the price for domestic products (subsidy). It is a politically motivated policy, used by nations, to give a competitive advantage to the domestic industries over foreign industries. In simple words, it is a barrier to free trade.
Protectionism has always been the topic of most discussions. There are examples of countries like North Korea and some of the Latin America as a failure to protectionism. However, the belief of trade revolution starting from protectionism and a success stories back in the day could be the strong point favoring the protectionism policies. Protectionism could be both good and bad.
Arguments for Protectionism
"Food production is so central to our nation that we must protect the United States farm industry from foreign competition. Our agriculture output is so important that in a time of crisis we should not have to depend on other sources for food." (5) This quotation from an economist Edmond Sefried of Lafayette College in Pa, who considers himself a “free trade economist”, emphasizes on how protectionism could sometime be good. A good example of this is, once again, in the U.S. agricultural industry. The Agricultural Adjustment Act of 1933 allowed the government to pay farmers to not grow crops or livestock, thus restricting supply and raising prices. This subsidy helped farmers who had been devastated by the Dust Bowl. (2). Protectionism, if used in short run, the country could have following benefits:
a) Protection of domestic and new industries
Through subsidies and quotas, the policy attempts in giving domestic industries a competitive advantage over foreign industries. The nation subsidizes the domestic industries, making the prices low, which
BSAD 430-01
Protectionism: Good or Bad?
Protectionism is the economic policy adopted by some nations to restrict the flow of goods to the country by: increasing the price of imports (tariffs), restricting the quantity of imports (quota) and lowering the price for domestic products (subsidy). It is a politically motivated policy, used by nations, to give a competitive advantage to the domestic industries over foreign industries. In simple words, it is a barrier to free trade.
Protectionism has always been the topic of most discussions. There are examples of countries like North Korea and some of the Latin America as a failure to protectionism. However, the belief of trade revolution starting from protectionism and a success stories back in the day could be the strong point favoring the protectionism policies. Protectionism could be both good and bad.
Arguments for Protectionism
"Food production is so central to our nation that we must protect the United States farm industry from foreign competition. Our agriculture output is so important that in a time of crisis we should not have to depend on other sources for food." (5) This quotation from an economist Edmond Sefried of Lafayette College in Pa, who considers himself a “free trade economist”, emphasizes on how protectionism could sometime be good. A good example of this is, once again, in the U.S. agricultural industry. The Agricultural Adjustment Act of 1933 allowed the government to pay farmers to not grow crops or livestock, thus restricting supply and raising prices. This subsidy helped farmers who had been devastated by the Dust Bowl. (2). Protectionism, if used in short run, the country could have following benefits:
a) Protection of domestic and new industries
Through subsidies and quotas, the policy attempts in giving domestic industries a competitive advantage over foreign industries. The nation subsidizes the domestic industries, making the prices low, which
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