Beware The Trump Trade Trap

Free Trade is the unrestricted purchase and sale of goods and services between countries without the imposition of constraints such as tariffs, duties and quotas. This policy would allow many domestic consumers to purchase goods abroad freely as they can buy goods domestically. Protectionism, on the other hand, is government action or policies that restrict or restrain international trade with tariffs, quotas, and subsidies. The most powerful weapon protectionism has is a tariff, which imposes a tax on imported goods and services. However, protectionism is a policy favored by those in politics and the people go unnoticed about how these changes affect them. This hurts both economies as consumers are forced to pay higher prices and other countries would lose potential sales due to a decrease in demand.

First of all we need to define what the comparative advantage is. One obvious concept is that country’s ressources can

Traditionally heralded as the defender of free trade and open markets, most people would assume that the United States rarely, if ever, participates in protectionist trade measures. Yet, while the US has presented an increasing willingness to engage in open, international trade in recent years, the history of the country is decorated with countless protectionist measures. Why would any country, especially the bastion of free trade, opt to enact such measures? For numerous reasons, in fact. Typically, the reasoning behind each protectionist measure can be categorized into six distinct arguments: 1) the “Infant Industry” argument, 2) the “Dying Industry” argument, 3) the “Developing Government” argument, 4) the “National Pride” argument, 5)

“The Greening of Trade Wars” Forbes, 183(8), 26. Retrieved May 10, 2009, Forbes.com.) Although many believe that protectionism may indeed afford some advantages for domestic business, opponents of protectionism argue that due to the interdependence of global trade and financial systems, these advantages are offset by many negative consequences (William A. Kerr. (2009). “Recession, International Trade and the Fallacies of Composition.” The Estey Centre Journal of International Law and Trade Policy: Special Section on Geographical Indicators, 10(1), 1–11). For instance, an unintended—and unavoidable—consequence of subsidies and tariffs is higher prices for products available to consumers. Protectionist policies also tend to lower the overall quality of goods available and ultimately increase the tax burden on the general public. Writing in the “No” selection for this debate topic, Professor of Economics at California State University Robert Krol describes the findings of various economic studies of international trade. He looks at the effect of trade on employment and wages as well as examining the costs of trade restrictions. From his research, he concludes that “Although international trade forces significant adjustments in an economy, as the evidence shows, the costs of international trade restrictions on the economy outweigh the limited benefits these restrictions bring to import-competing industries.” (p. 10) The opposing view, taken from Prospect Magazine, is

Comparative advantage, theorized by David Ricardo, exists when countries have marginal dominance over goods and/or services production levels, and when the opportunity cost of their production is lower. International trade affords great opportunities for workers by improving their overall living conditions. The International Monetary Fund states international trade between diverse countries facilitates trade and industry growth, higher employment levels and more apposite income standards as opposed to countries without international trade economic structures (www.imf.org, 2000).

Free trade policies created a competition in the open market for continuous innovation leading to better products, new markets, increased savings and investments, and better-paying jobs. It gives consumers the opportunity to improve their standard of living. There is a consensus among economists that nations are better off with free trade than with policies restricting free trade. It provides better opportunities for entrepreneurship and investment. Economists believe that free trade can affect a nation’s income and its economic well-being through

mm One of the central problems of international trade is a debate about the feasibility of, on the one hand, free trade, ie, trade is not limited to any barriers to the movement of goods between the two countries, and on the other -.. to establish such barriers in order to protect national Producers from more competitive foreign suppliers. Supporters of both free trade (free trade) and protectionism put forward a number of arguments in support of their position.

Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another. Even if one country has an absolute advantage in producing all goods, different countries could still have different comparative advantages. So if one country has a comparative advantage over another, both parties can benefit from trading because each party will receive a good at a price that is lower than its own opportunity cost of producing that good. Thus, comparative advantage drives Marcoco to specialize in the production of the goods for which they have the lowest opportunity cost, which leads to increased

Comparative advantage theory refers to a country’s ability to produce a good at a lower opportunity cost than another country.

One of the greatest international economic debates of all time has been the issue of free trade versus protectionism. Proponents of free trade believe in opening the global market, with as few restrictions on trade as possible. Proponents of protectionism believe in concentrating on the welfare of the domestic economy by limiting the open-market policy of the United States. However, what effects does this policy have for the international market and the other respective countries in this market? The question is not as complex as it may seem. Both sides have strong viewpoints representing their opinions, even the population of the United States is divided when it comes to taking a stand on the issue. After examining all factors on the

Comparative advantage is a condition when country can produce goods with lower opportunity costs compare with other countries. Opportunity costs here means the costs that we choose over other things (we gave up on other goods and spend cost for goods that gives more benefit).

As it can be clearly seen, this process is very wide-ranging which includes both economic and social results. However, in this study, it is aimed to deal with only trade which is quite controversial subject in terms of applied policy choices whether more liberal or more protectionist. For the purpose of this tariffs and quotas are chosen as an example of protectionist policies and Turkey is thought as case country in terms of membership of Customs Union. It will be argued that free trade policies may not seem to have destructive impacts on domestic markets of developing countries. On the contrary, this may help those countries to generate a stronger market thanks to

For centuries economists have sustained free trade as the best free trade policy. Even so, after a more in depth analysis one can notice certain advantages and disadvantages of free trade. This report explains the concept of free trade, the implications of engaging in free trade and the pro and con opinions along with an explication of certain theories related to the concept.

Comparative advantage- a nation, like a person, gains from trade by exporting the goods or services in which it has its greatest comparative advantage in productivity and importing those in which it has the least comparative advantages

Although the concept of free trade and globalisation may subtly imply a polarity between the developed and developing worlds, it can be argued that, in order to function successfully, the pressure to create a competitive and comparative advantage hold all nations on a level-playing field. Sinclair Davidson (2015) cited David Ricardo (1821) in his argument that foreign trade is, indeed, beneficial to a country, for a number of reasons. By reducing the cost of commodities and raising living standards through the creation of jobs, international trade allows developing countries to create a competitive advantage.