has its pros and cons. It can benefit one country but not for others. Some say that trade protectionism is a way to limit
unfair competition from the foreign industries/companies. However, in the long
term, it can weaken the industry due to the disadvantages, which will be
elaborated later on.
advantage of protectionism is it keeps the domestic economy going. When there
is a decrease in imports, domestic firms will have lesser competition, which in
turn allows them to continue operating
their business. This will help protect employment because demand will be higher
since there is no competition. As we all
know, when demand increases, supply will have to increase to be on par with the
demand. This means that the firms will have to produce and sell more goods,
giving them less reason to decrease its costs by reducing its workforce. Locals
who have jobs will continue to consume (via household) while allowing the
economy to flow.
advantage is that it can prevent dumping. The definition of dumping is where
big/foreign companies will enter an economy to sell their goods at a price
lower than the costs of production. This will cause the consumers of that
particular country to spend more than the consumers in overseas areas. This
method will push both the manufacturers and producers in the foreign countries out
of business, resulting in loss of jobs and an increasing rate of unemployment.
can be used for a strategic reason like
in times of war. Such focus will normally be on military firms/national defence-related
firms. These firms are essentially needed to the nation’s defence. Hence, these
industries are protected from foreign competitors so that they (domestic) can
supply the country the necessary materials needed in case of war.
it can allow infant / ‘fairly new’ companies to develop at an acceptable rate.
The new and upcoming firms will be given the opportunity to grow as a business
until they are big enough to compete with the international markets and not be
pressurised by experienced firms.
the other hand, protectionism can result in unhappiness among countries. Reason
being? One country is getting all the benefits but forgoing another country’s
benefit. This kind of hostility will decrease the specialisation (i.e.
comparative advantages) between the nations which eventually leads to damaging
of the economy.
will have to pay more for protectionism.
Since there is a system with no competitive pricing, domestic companies can
charge/raise/shoot up their prices and not increase the quantity and quality of
their goods. This will leave the consumer no choice but to purchase from these
just the consumer that will suffer, but businesses too. Since the businesses are
well supported by the government, they will believe that it has a pleasant
safety net set up behind to protect them. This may become inefficient in the
long-run because there is no incentive to drive cost efficiency.
a nutshell, I feel that the statement above can be justified and necessary in certain
context but not at the same time. For instance, protectionism can be
valid and necessary in Africa. As found
online, Africa has a very high unemployment rate in 2017. With protectionism,
firms in Africa can grow bigger to compete with countries such as China or
Dubai. Furthermore, it can help reduce unemployment rate because since they are
growing their business, they will require more local workers to produce their
goods. In fact, I came across an article which wrote that Africa is a hot commodity
and that it can be the next China or Dubai. So, protectionism can further
enhance their business and social welfare.
the statement can don’t be justified and necessary as it can reduce domestic
GDP. The price for the US products will be higher than the imported goods
because, without higher trade barriers,
America’s companies will not be competitive. As a consequence, the economy’s
entire price level will rise. Due to the higher price, international
competitiveness of US decline resulting in exports to decrease. Since export
decreases, aggregate demand decreases. A decrease in export will result in
lower production and lower income. All these will decline US’s economy.