Evaluate the arguments for and against free trade and protection] Free Trade is the ability of nations to trade products openly & safety for increased efficiency, to utilize specialization and for absolute & comparative advantages. Protection involves governmental influences hindering the competition from foreign trade on local firms. Free trade and protection have complete opposite effects on the economy, and many aspects influence the industries in favoring the opposed actions for the benefits that firm gains.
The advantages of free trade often outweigh the disadvantages for strong, wealthy economies as their buying & selling power abuses smaller economies. This has been overcome by the introduction of multilateral agreement between nations after WI, giving smaller economies the ability to come together & increase their negotiation power. Therefore the advantages of free trade can vary from nation to nation. Due to the increase of output in the economy there is a resulting increase of income and therefore consumption, this will also stimulate individuals to save and later invest in reporter or other assets.
Ultimately there is an increase in the standard of living. Another advantage to free trade is the accessibility to goods previously unobtainable from lone nations- this is extremely efficient and encourages specialization of products. Free trade allows all resources to be used effectively & efficiently through nations using comparative & absolute advantages. Through on the other hand, disadvantages of free trade also occur. As previously mentioned, smaller developing nations rich in scarce resources are often manipulated by the larger, wealthier nations.
Free trade in this case causes the abuse of bargaining power in trade agreements. Barriers occur to free trade as well, nationalism is a major factor that disadvantages the principles of free trade. National Pride after WI has resultantly caused nations to be reluctant to trade as due to the loss of trust and peace between nations, Egg. Japan + China. Protection policies for a domestic economy are effective on the short term, though when evaluated on the long term, disadvantages do occur. The infant industry argument pushes to protect young developing industries to help them compete on a global scale.
The government provides funding and support to these industries. Problems arise in the long run when the government decides that particular industry isn’t infant anymore, these industries then have to manage their own affairs without financial funding, tax payers money could be going to an inefficient industry. If this occurs there will be an increase in unemployment and therefore a decrease in income and resulting in less tax revenue collected combined with more welfare aments required, ultimately sending the domestic economy into a deficit.
Economic Protection Essay By Nickname argument. Domestically, first world countries defend their high standard of living, though labor can be granted at lower cost to producers from overseas in third word countries. This argument ignores the fact that Australia domestically has high productivity due to research, development and technology- making our labor more productive. Competitiveness should also be graded on other levels not Just cost- annuity, service and design factors should also be taken into consideration.
Protection policies in smaller economies are important In preventing dumping. This refers to the practice of exporting goods to a nation at a lower price then the selling price in the nation of origin. Dumping is how larger economies deal with the excess of production of goods (production surplus). Due to the unrealistic low prices of foreign goods, local firms suffer as they can not compete resultantly forcing domestic producers out of business, reducing a nations productive capacity and increasing employment.
For consumers, dumping is a short term advantage as products are being sold at low prices. Overall, free trade is the result of globalization and the increased encouragement of a global economy. On a large scale, free trade would allow a long term growth in standard of living. In the short term, free trade can be abused and be inefficient in smaller economies. Protection policies intend to reduces the impact of free trade on smaller economies, allowing small barriers to protect the domestic economies.