Trade Protectionism : A Viable Alternative Solution

Therefore, the imposition of tariffs by the governments of any of the engaged countries would affect the company’s price for their product.

In modern economic policy of nations and states, the tariffs a tool to tax goods and services being imported. The principal desired outcome for this tool is to create security for the domestic industry from the imported product, which may be cheaper for consumers to purchase. (McEachern, 2015)

Tariffs are taxes enforced on the importing of goods and services (McEachern, W. A., 2015). If there is a tax increase on imported goods or services, then producers could increase the price of the good to make up the difference. The Tariff Act of 1789 was signed by President George Washington. This was the first significant Act passed in the United States. The purpose of the Act was meant to protect trade and raise the federal governments revenue and to regulate Commerce with foreign nations (Malloy, M.P., 2004)

From an academic standpoint, economists overall believe that free trade would benefit the economy more than instituting tariffs and non-tariff trade barriers. However, the reality is quite different. Politically, tariffs help to strike a balance between social welfare and the politicians’ goals. One theory is that campaign contributions are needed for re-election; and to achieve these funds, politicians will weigh this need against welfare-reducing protection for industry lobbyists (Magee, 2011). The models would suggest that the tariffs should actually be much higher than they are due to the low efficiency cost of tariffs compared to the substantial gains provided for the producers (Magee, 2011). However, developed countries actually have very low tariffs. There are six possible explanations for why developed countries have such low tariffs when the political theories behind why we have tariffs at all would suggest they should be higher.

As a result, of rising opportunity costs, domestic production may stop short of complete specialization. However, if a large group of people and nations are benefiting from specialization and in international exchange, the government has the power to restrict the free flow of imports or encourage exports. Government can interfere with free trade by protective tariffs, import quotas, nontariff barriers, and export subsidies. Protective tariffs are tariffs that are enacted with the aim of protecting a domestic industry. Import tariffs limits on the quantities or total value of specific items that may be imported. Nontariff barriers is a form of restrictive trade where barriers to trade are set up and take a form other than a tariff. While export subsidies is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. In executing barriers against imports, the nations whose exports suffer may retaliate with trade barriers of their own, creating a trade

➢ Tariffs–Tariff is a government tax that is use to protect the domestic companies by inflict on goods and services with the intention of being imported or exported from a country

Tariffs are placed on imports and foreign products. They were originally made to provide revenue for the federal government, go before income or property taxes.2 However, tariffs now have a different uses and are looked at differently. Tariffs increase the price of a product, lowering its demand and sets aside domestic producers from foreign competition.2 Because of this, countries places higher tariffs on goods that will be considered import sensitive.2 The U.S. also imposes taxes on the income that is earned instead of placing taxes based on consumption,which is called a Value Added Tax.1 This is a motivator to move companies

product, the effect is, like a tariff, to raise the price of the import and make

The use of tariffs in domestic and international trade has remained a standard practice during both the American Revolution and Civil War times. Protective and revenue

A widespread view developed among economists and policymakers in the early post World War II period Import substitution policies were popular amongst developing economies was that the best way for these countries to develop more rapidly was to stimulate industrialisation by adopting import-substitution policies. At the time, there seemed to be a number of good reasons for such an approach. The policy makers of the newly independent nations were keenly aware not only that most of the countries from whom they obtained independence had much higher per capita income levels and were much more industrialised but that their former rulers had imposed economic policies in the past which discouraged industrialisation within the new nations and industrialisation seemed to offer the possibility of achieving faster growth, higher per capita income levels and the economic and military power needed for national security. An economically sensible way of achieving industrialisation seemed to be to restrict imports of manufactured goods for which there already was a domestic demand in order both to shift this demand toward domestic producers and permit the use of the country’s primary- product export earnings to import the capital goods needed for industrialisation. There also appeared to be a number of examples where high levels of import protection contributed positively to industrialisation. Although Great Britain had adopted a policy of free trade during its period of rapid growth in the

Ever since the first involvement of government in international trade, many people have posed their opinion about what the role of government should be in it. Different factors are involved when it comes to deciding what this should be. It impacts a lot of people, so in order to do that, trade policy must be properly defined, identify what the roles of government currently are, and their involvement in it, and then analyse what should be their role. Trade policy is how a country carries out trade with other countries (Commercial Policy, n.d). Even though a lot of people support government intervention in international trade, countries would benefit a lot more if the government removes protectionism and promotes free trade instead.

In addition to political reasons, governments also intervene in investment and trade to maintain or enhance their economic positions. Countries’ leaders find it essential and rightly so, to offer protection to new and emerging industries, referred to as infant industries, from stern competition until they possess a comparative advantage to be capable of competing efficiently in international markets. The other economic reason for intervention is based on the strategic trade policy, which states that a government should assist domestic firms to attain first-mover advantages and also

The international trade of goods across the world accounts for approximately 60% of the world Gross Domestic Product (The World Bank, 2014). A great proportion of goods transactions occur every second. The primary question is whether international trade benefits a country as an entirety, and, if so, why would a country implement protective trade policies to restrict particular exports? To address this question, this essay aims to explore the impact of trade on various economic stakeholders, including consumers, producers, labour and government and, furthermore, will compare models and theories with reality to ascertain the true winner/ loser in the international trade market.

Most countries are dependant on international trade and the government plays a big role in this through forming their trade policy (Miller, 2010). In the past smaller countries have relied on trading with bigger nations, but in the mid-1960’s a lot of countries looked to pursue independence in their foreign policy. Even though we live in this new technological and global age, forming trade relations is vital to our economy. Every country has different trade policies which determine how trade occurs between themselves and other countries. The government has various roles in its policy and even though there is a lot of debate over what this should be exactly, the highest amount of benefits occur when they strive for free and open trade. The success of our countries economy in terms of both growth and development depends on the government’s commitment to its minimal role of encouraging international trade through forming closer economic relations.

Persistent unemployment pushes many groups to call for protectionism; one of the most effective is organized labor. By limiting imports, local jobs are retained as firms and consumers are forced to purchase domestically produced goods and services. However, unless the protectionist country is relatively small, such measures usually do little to limit unemployment. On the other hand, they may result in a decline in export-related jobs because of (i) price increases for components or (ii) lower incomes abroad. Further, such measures are likely to lead to retaliation unless either the protectionist or the affected country is relatively small. Thus, governments must carefully balance the costs of higher prices with the costs of unemployment and the displaced production that would result from freer trade when enacting such measures.