Protectionism
Protectionism is the practice of countries imposing tariffs to control the manner through which their nationals conduct business on the international scope to limit or eliminate the chance of exploitation. The principle is highly applicable in the global markets, with many world countries keen to protect their nationals from probable exploitation.
While almost all countries apply protectionism in trade, the two common nations that are known for their stringent measures in the international trade arena are the USA and China. The two nations are famed for their protectionism measures against each other. However, these are not the only nationals that are highly active in that respect with a World Trade Organization (WTO) report indicating that it is ac common occurrence among many others in the world. The applied measures vary from one country to the other, and they include an increase of tariffs, close management of immigration to restrict entrant of particular nation’s nationals, and subsidizing on exports. An example of a nation that has applied protectionism is Russia, which in 2009 increased its tariffs. Japan also recently controlled the number of imports of food products into the country by strengthening sanitation measures and thus encouraging local production.
China has been the most affected country by the protectionist measures, with 55 countries restricting the importations of products from the nation. Japan and the United States also closely follow China with 46 and 49 nation’s respectively banning the purchase of goods from the country. Recently, the proliferation of Brazil’s economy has increased the importation of products, especially automobiles from China. This has prompted the Brazilian government to restrict what comes into the country from China as a means of encouraging the growth of the local industries.
One of the key examples of the government’s input in encouraging the growth of the arising local industries that are at their developmental levels is the case of China. The country has limited the number of imports to ensure that the sectors have the chance of growing without the presence of imported goods that would curtail such developments. This move has been key to the realization of the massive growth of the Chinese economy due to the conducive environment that has been set for the local industries.
Various countries offer a myriad of reasons behind the introduction of protectionist laws. Primarily, many of the countries seek to encourage the development of the starting industries of those that are in the primary stages of growth. By barring the importation of goods from foreign nations, the local sector is capable of growing, and this has numerous advantages, with the fundamental one being the growth of the economy.
World countries also introduce protectionist policies to prevent the probable scenario of dumping. This happens when imports from a particular country trade at lower prices than the similar goods that are produced locally. The United States is an example of a country that is keen to fight the dumping of products, especially from China. The country has stringent anti-dumping policies that aim to eliminate the presence of competing goods that could lead to loss-making for the local companies. The protection of the job market is also a key reason behind the introduction of protectionist policies. Through the use of high tariffs, countries such as the United States are capable of competing against other nations where the cost of production is low and thus the goods in the nation’s trade at low prices. Without protectionist measures, industries such as the steel production sector could be forced to minimize the labor costs to lower the cost of production, which is relatively high in comparison to countries such as Brazil. Therefore, to prevent the loss of jobs, which would consequently hurt the citizen’s lives and the economy at large, protectionist laws enable the US to produce steel without worrying about foreign competitors.
While the use of protectionist laws could appear to be a perfect means of encouraging the production and protection of local industries, the policies are also damaging to the countries involved. To bring fairness, nations tend to countermeasures imposed by other competitor nations. Therefore, they use their respective positions as leverage for acquiring access to the other country. For instance, the United States would be forced to limit the imposed tariffs on the importation of Steel from Brazil if the US intends to export other goods to the country. Therefore, the protectionist laws act as the key drivers in international trade agreements between the involved countries. In that regard, it is vital to regard the policies as key in aiding negotiations rather than barriers of trade between the two states.
Another impact of the introduction of the protectionist policies is the straining that they impose on the country’s citizens. While firms will be protected from the encroachment of the market by foreign nations, the use of protectionist laws does not consider the impact of this effect on the locals. Where goods are produced at a high cost such as the United States Steel industry, the prices of the commodities will also be high, and this will hurt the local people who are the primary customers owing to the locked out relationship with other nations.
Almost all nations have an advantage in producing a particular product than the other competing countries. The application of protectionist laws locks locals from buying cheap products from countries where the production cost is low. The other fundamental disadvantage of protectionist measures is that they are designed to benefit only a select few in the country at the expense of the millions of citizens who suffer as a result of their inability to access cheap goods.
The protectionist policies also have a damaging impact on a countries international market share in the selling of particular goods. For example, the encouraging of production of particular highly-priced goods such as the case of the United States steel industry means that the product’s price is relatively higher than in the competitors. That means that even without the sanctions, selling such products in the international market will prove to be a herculean task. The local economy will also suffer in case of such an occurrence as the industries will be unable to trade with their counterparts in the international field and thus lose their profitability. With the increased cost of products, the consumers will be unable to buy them, and this will result in the collapse of the companies. The consequent effect of this is the reduction of the county’s Gross Domestic Product (GDP). Therefore, the impacts of protectionist measures are numerous and, in most cases, end up hurting the involved nations and their citizens while at the same time, limiting the chance of growth of the emerging economies. Instead, the perfect means of encouraging the development of quality products at affordable prices is to remove trade barriers and lower the imposed tariffs.