Gordon brown said this in April 2008: " it is understandable – and this is what we have got to deal with – that in Europe and America worries exist. It is worrying that the dominant response is not to welcome this new competition, but that people are in fear of their jobs and their livelihoods.We see in America, particular, protectionist sentiment growing. This raises the question as to whether in response to this more testing global economic outlook the world will relapse into the counter-productive but familiar defensive and negative protectionism. under the illusion that people can stop change, they will deny themselves what are the competitive benefits of globalization."
From an economic perspective critically assess whether or not the claim that protectionism is counterproductive is merited.
It definitly could be counterproductive
Not buying other countries products will cause a drop in trade, and the other country will stop trading with you as well
Isolationism ruins the markets you have outside of your country. This means cheap foreign workers as well as people willing to buy your products
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by cutting off from other countries the country would definitly have a decrease in exports and cash flow, therefor limiting jobs
not trading and competing brings the bar and necessity of moving forward down and limits progressivism and moving forward
Overly protecting domestic things will in turn affect foreign relations and will in turn affect the global situation.
January 2nd, 2010 at 3:03 am
It is not that simple; one does not say yea or nay on protectionism. It must be viewed in the larger context of competition and policy.
The Adam Smith theory is that intensely competitive markets are self-regulating because competition for customers or clients results in the best quality for the lowest price for that level of quality. As competition decreases, however, as the result of collusion among business enterprises, as the result of multiple mergers and buyouts, and as the result of the ability of the most powerful enterprises to secure advantage from government that does not benefit their competition equally, Adam Smith-style capitalism ceases to function as he envisioned. Instead, exactly what he so earnestly wished to avoid, government favor for certain enterprises over others, becomes business as usual.
Here is one example of what has resulted: in the US, individuals with easy access to legislators are offered lucrative positions with firms seeking government favors. The individuals, because of their familiar relationships with members of the legislator’s staff, enjoy access to that legislator that no average citizen could hope to have. Furthermore, the individual can offer the support of the firm(s) he represents in the next election on certain conditions, which the legislator must accept. The individual can also make veiled threats about the possibility of opposition by the firm(s) during the upcoming election if the legislator should refuse.
In practice, to narrow the example, say that a behemoth of a global corporation gains access to several legislators for the purpose of gaining tax breaks for the corporation in exchange for its taking capital it could invest in this country and investing it abroad instead (such tax breaks, unavailable to businesses operating in the US, do in fact exist). Furthermore, the legislator must pursue a "free-trade" policy, alllowing all goods imported by the corporation to enter the US free of any tariffs. In pursuing the policy, the legislator will not look askance on the corporation’s contracting or subcontracting firms in the host country for sweat-shop labor, child labor, prison labor, etc., at sub-subsistence wages. Neither will the legislator take notice of pollution by the corporate giant of the host nation’s air, land, and water.
After only a few years, acting under this ‘"free-trade" policy, corporations manufacturing widgets in the US close down operations in the US and now import those widgets, whose manufacture they contracted in the host country. The US workers, losing millions upon millions of jobs that paid a living wage must now scramble to find any job–almost always one paying less than he made before. Having less purchasing power, the displaced workers, also consumers, lack the purchasing power they once had. Since 70% of the US economy is driven by consumer spending, the US economy loses vitality. It ceases to be a country that once produced goods having value; once an exporter, it is now an importer of those goods. The ensuing transfer of wealth from the poor and middle classes to the wealthiest 1-2% of Americans slowly drives more Americans who lived in the middle to upper middle classes down to a level nearing poverty. Only the well-heeled global corporations, among which there now exists little if any competition, become wealthier–much wealthier.
The solution would be (1) to dust off US antitrust laws and break competition-defeating firms–some "too big to fail" into smaller firms incapable of manipulating the free market and, thus, forced to compete for real; and (2) to place heavy tariffs on imported goods if (a) they are manufactured by workers not paid living wages, and (b) the contracting corporation, knowlingly or not, allows its agents (contractors and subcontractors) to befoul the air, land, or water of the host country.
Provided the importing corporation is responsible for ensuring that the goods it imports from abroad do not violate policies and standards to which it would be subject in the US, there would be no tariff.
Free trade, then, would be conditoned on fair trade.
This is one example of a way in which tariffs–which Brown would most likely label "protectionism"–could be used to ensure free trade on a more nearly level playing field while it would protect both the importing country and the exporting country from exploitation of its people and from destruction of the planet we all must share.
***I agree with Mike: the Smoot-Hawley Tariff Act under Herbert Hoover bears his argument out. The problem we have today, however, could not have been anticipated during the Hoover Administration. That problem is ensuring that free trade is not simply a pretext for exploitation of people and despoilment of the land, waters, and air all of us share on this planet.
Ja N: Ingoramus? And why is that, specifically? I take it that you are saying, "I’m not saying why, but you are stupid not to agree with me." Why is "free trade" good when it exploits people, befouls our precious resources, and benefits no one but the executives and stockholders of a global corporation?
***Baila, not only do you not decide on a best answer, but you provide no indication that you took the trouble to read the responses. I shall waste no time in the future answering any question you pose.
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January 2nd, 2010 at 3:37 am
It definitly could be counterproductive
Not buying other countries products will cause a drop in trade, and the other country will stop trading with you as well
Isolationism ruins the markets you have outside of your country. This means cheap foreign workers as well as people willing to buy your products
—-
by cutting off from other countries the country would definitly have a decrease in exports and cash flow, therefor limiting jobs
not trading and competing brings the bar and necessity of moving forward down and limits progressivism and moving forward
Overly protecting domestic things will in turn affect foreign relations and will in turn affect the global situation.
References :
January 2nd, 2010 at 3:55 am
trade is a technology. technology increased efficiency. efficiency is the property of society getting the most of its scarce resources. anyone opposed to free trade is an economic ignoramus.
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