Is Trade Protectiveism the Answer?
Essay by Maxi • June 25, 2012 • Essay • 632 Words (3 Pages) • 1,596 Views
Is Trade Protectionism the Answer?
Trade protectionism claims that limiting foreign goods will save jobs and allow American industries to recover and thrive. Protectionists also claim this will allow trade deficits to decrease, which in turn will be support domestic manufacturers even further. However, disadvantages exist such as such as higher prices and taxes, which are passed on to American consumers, continued debt and even an increased chance of war. What exactly is the solution?
Protectionism raises taxes or often referred to as tariffs and inflicts quotas on the amount of foreign merchandise that is permitted to enter the country. For certain groups, such as auto manufacturers, farmers, unions and textile manufacturers this can be very appealing because ultimately they can charge more for the goods they produce versus if it was a free trade market. Another argument for protectionism is that if our nation doesn't protect our countries manufacturers foreign competition will result in further job losses in an already troubled workforce. It is also viewed that imposing "fair trade" practices would increase the profitability, so foreign markets cannot dump similar products already produced in America for a much lower price.
Proponents of Free Trade believe that protectionism destroys more jobs than it creates; quality declines and quality products are diminished or completely unavailable. When protectionist laws raise tariffs it not only raises the cost of goods, but the cost of business as well. Ultimately, if you have less money to purchase the goods you need than the reduction in consumer spending will reduce jobs. In turn, unemployment insurance costs skyrocket and employers expect current workers to produce more with minimal pay increases. Trade protectionism therefore does not help save American jobs or companies.
Protectionism also burdens U.S. consumers with higher taxes and prices. Everyday products can cost six times the world price for a particular product such as sugar because of trade restrictions (Vincent & Miller). In addition, to higher prices you can expect to pay higher taxes on imported goods and your general taxes as well. In order to pay for the compliance of protectionism laws the fees are passed back to all Americans who file taxes because these people developing and enforcing the policies need to receive a salary too. This also creates a mind-boggling world debt, which in turn could create a depression the U.S. has yet to see. The value of the dollar is at an all-time low and if foreign countries start calling in their loans Americans will not be prepared for the possible devastation.
Another advantage of Free Trade over Protectionism is it encourages cooperation with other nations. If you limit what can be imported than logic says it will harder for the U.S. to export, which also deflates the value of the dollar in
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