Analysis Of Free Trade Versus Protectionism

There are two sides to the debate when it comes time to decide what trade arrangement should be used to boost economic growth. If goods or services are freely traded between countries, there are no restrictions or limitations. However, if a country wants to limit or prohibit trade, then protectionism will be used. How does global protectionism impact the market? What will be the impact of protectionism on the global market? These are difficult questions to answer because each option is supported by many. The global market is affected by protectionism in different ways. This paper will explore the pros and cons of free and protectionism, as well as the examples provided by countries that implement each trade agreement. Additionally, it will discuss which approach is most effective to aid in economic growth.

Free trade agreements allow countries to market their products and services more freely between themselves. Because international trade agreements give consumers greater access and expertise, companies can create more effective products and services. The trade agreement reduces government spending because governments use subsidies to protect local industries. The government doesn’t need to spend as much to ensure prices are affordable. This allows for more money to be used to meet other social needs. Another advantage of free trade is the ability to transfer technology so that local businesses can also access the latest technologies from multilateral partners. Although free trade has many advantages, there are also some disadvantages. This trade agreement can lead to job opportunities being outsourced. Because international workers are cheaper, more skilled, and have fewer safety protections than local workers, companies will choose to outsource them. As intellectual property rights are not taken as seriously abroad, free trade can encourage theft. A disadvantage to free trading is the possibility of deterioration in natural resources. Emerging countries are not equipped with sufficient environmental protection and freetrade can lead to reduced natural resources. The North American Free Trade Agreement, also called NAFTA, is the world’s largest free-trade agreement. This agreement was made between Mexico, Canada, and the United States in January 1994. This agreement was created to increase trade between the three countries and make them more competitive on the global market. This agreement increased each country’s economic output by increasing their trade. NAFTA was a huge success in fulfilling its objectives, but has also experienced many downs. One of the biggest problems with NAFTA is that it has been accused by many of its members of taking U.S. workers, putting out Mexican farmers and exploiting Mexico’s environment. This is a good example of how free trade can have a positive impact on economic growth and success. However, each country must pay the price to enjoy these benefits. Protectionism refers to trade where countries try to limit imports in order to protect their industries from foreign competition. Protectionism, like free trade has its advantages and drawbacks. Protectionism has the advantage of reducing economic inequality and income gaps by protecting domestic goods and services. This trade strategy also helps to protect and grow new industries. New industries cannot compete if there isn’t support from government. The tariffs that are placed on imported goods will shield local businesses. Through tariffs and other measures, protectionism also generates income which can be used by the government to fund its operations. There are many disadvantages to protectionism. This trade can have the unfortunate side effect of raising prices rather than lowering them.

Due to the implementation of tariffs, foreign goods are more expensive while domestic goods are cheaper and domestic companies make the same money and have their prices match foreign goods. Because there are fewer opportunities for countries to work together economically and gain power on the global market, protectionism can lead to bad international relations. Countries that depend on one another for their economy will be less inclined to start wars against each other. Customers are limited in their choice when import tariffs are applied to goods. International goods may not be accessible to local markets, or they can be supplied, but prices might be too high to reach average consumers. The current trade war between the United States and China is a great example of protectionism. It began when the United States placed tariffs on Chinese goods. Trump first applied tariffs in steel and aluminum to reduce imports, but this lead to more losses to other countries. Trump also placed a 25% tariff for 818 categories of Chinese goods on July 8, 2018, which caused China’s accusation that the United States had started a trade war. This illustrates how tariffs can ruin relationships and lead to an increase in taxation.

It can be very difficult to find the right trade agreement for a country. Different trading methods may work for different countries. However, this paper’s research has convinced me that free trade is best. The World Bank’s 2016 data on import duties showed that Chad (16.36%) and Gabon (16.93%) were the top three most expensive countries. Data from the World Bank and World Trade Organization also revealed that Switzerland was third in terms of import tariffs with a mean tariff weight of 0%. This shows that developing countries are more restrictive in terms of their trade restrictions than developed countries. Countries can have easier access to global markets through free trade agreements. The short-term protection of domestic industries is not provided by high tariffs. To make more profits, long-term, global corporations will continue to hire the lowest-paid workers from all corners of the globe. As mentioned in the previous paragraphs, both protectionionism and open trade have advantages and drawbacks. Each country will decide which advantages they want to receive. Free trade seems to have more disadvantages than protectionism, so it seems that protectionionism is the best option.


  • rosewebb

    Rose Webb is an educational blogger and volunteer who also studies for a degree in law. She loves to write about her experiences and share her knowledge with others, and is passionate about helping others to achieve their goals.

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