...Arguments for Free Trade among Nations as opposed to Arguments for Protectionism In economics, trade, both nationally and internationally is a subject that is highly debated. Trade affects every one in every nation, has a significant impact on a country’s standard of living and can be used to foster new ideas and products. There are currently two opposing policies of how to conduct trade, protectionism and free trade, also called laissez-faire. A county’s comparative advantage at producing certain products causes many debates over why one way of trade is better than another. Tariffs, embargo’s and quota’s that are put on trade are forms of protectionism, which is the restriction of trade between states/countries. Protectionism is preferred in some groups for a variety of reasons, one of the reasons is that, it is thought that protectionism can protect ‘infant’ or new companies and industires.1The idea behind this is that it helps protect domestic companies that are just starting from foreign competitors that could introduce products at a lower cost. Tariffs are then set up, to make the foreign goods artificially expensive allowing the new or ‘infant’ firm to set up until they are able to compete on equal footing.1 Another argument in favor of protectionism is that one country might be able to use it as a threat against another country to force a reduction or removal of their protection against its exports.3If the threat worked then that country using it as such would gain...
Words: 940 - Pages: 4
...International Trade & Finance Assessment Task 1 Free trade for poor nations Individual Assignment Prepared for: October 2012 Submitted: July 2012 Prepared by: Table of Contents Introduction …………………………………………………………………………… 3 Background …………………………………………………………………………… 4 Argument for free trade ……………………………………………………………… 4 Argument against free trade ……………………………………………….………. 5 Conclusion …………………………………………………………………………….. 7 List of references ………………………………………………………………………8 Introduction Through globalisation, competition, specialisation and access to technology, free trade and openness has allowed most countries to improve their growth enormously. Free trade has allowed and opened up a lot of opportunity for developing nations to improve their economy and to make provision for rapid growth. The comment that free trade cannot work or be in the interest of the world's poorest countries due to them being at a competitive disadvantage in every sector is a little false, as free trade has shown to help some but not all such or similar nations. Free trade can help the poor increase their wealth and provide opportunity however, in today’s world, free trade may also act as a hindrance to growth and lead to even greater poverty and resentment toward larger economies. This report aims to argue both points that free trade can work in developing nations and be in the best interest of poor countries. However, there are many counter arguments...
Words: 1949 - Pages: 8
...There was a free man that was determined to reveal the truth about the system of the slave trade, his name was Ottobah Cugoano. He was slave himself before earning his freedom, but once he was freed he used this to fight against slavery. Once he came to Britain he wrote about the slave trade system in 1787. Cugoano wrote about the slave trade to reveal the evils of it to those who would otherwise be ignorant to it. He wrote it to show the barbarous actions of everyone involved in the slave trade. Cugoano’s argument brings forth the mistreatment of the slaves that were captured and forced through this system. One example he uses is the fact that most slaves are stolen, not bought. Another would be the fact that families are separated from each other. Cugoano also wondered how these things could be supported under a Christian government. His evidence is genuine because he uses his own experiences as a slave that went through this system. He also uses facts about the slave trade to justify his argument against it....
Words: 515 - Pages: 3
...Phattaranit Prabpai Q1. The effects of international trade on a country’s development are often related to four basic economic concepts: efficiency growth, equity and stability Briefly explain what is meant by each of these concepts as it relates to the theory of international trade. The whole economic basis for international trade rests on the fact that countries do differ in their resource endowments, their preferences and technologies, their scale economies, their economic and social institutions, and their capacities for growth and development. Developing countries are no exception to this rule. Some are very populous yet deficient in both natural resources and human skills, at least in large regions of the country. Others are sparsely populated yet endowed with abundant mineral and raw material resources. Still others are small and economically weak, having at present neither adequate human capital nor the material resources on which to base a sustained and largely self-sufficient strategy of economic and social development. A statistical summary of recent LDC trade performance and patterns. There follows a simplified presentation of the basic neoclassical theory of international trade and its effect on efficiency, equity, stability, and growth. We then provide a critique of pure free-trade theories in the light of both historical experience and the contemporary realities of the world economy. Like free markets, free trade has many desirable theoretical features, not the...
Words: 3889 - Pages: 16
...Cross-National Cooperation and Agreements GATT The General Agreement on Tariffs and Trade (GATT), begun in 1947, created a continuing means for countries to negotiate the reduction and elimination of trade barriers and to agree on simplified mechanisms for the conduct of international trade WTO The World Trade Organization (WTO) replaced GATT in 1995 as a continuing means of trade negotiations that aspires to foster the principle of trade without discrimination and to provide a better means of mediating trade disputes and of enforcing agreements The Effects of Integration Once protection is eliminated among member countries, trade creation allows MNEs to specialize and trade based on comparative advantage Trade diversion occurs when the supply of products shifts from countries that are not members of an economic bloc to those that are International financial market Foreign Exchange Foreign exchange is money denominated in the currency of another nation or group of nations. The market in which these transactions take place is the foreign-exchange market. The exchange rate is the price of a currency. The price of foreign exchange is set by D & S in the marketplace Rationale for trade intervention * Should the national government intervene to protect the country’s domestic firms by taxing foreign goods entering the domestic market or constructing other barriers against imports * Should the national government directly help the country's domestic firms...
Words: 665 - Pages: 3
...workforce, cheaper internet, and telephone communications add to the advantage. International trade cycle The commercial policy adapts a change as per the changing international trade cycle. The international trade shows stages like emerging exports with mass production followed by foreign competition and finally competition from imports. 1. Exports May be only manufacturer of new product Overseas customers learn of product, export market develops 2. Foreign production Export volume grows Production technology becomes stable Reduced costs for transportation Exports diminish 3. Foreign competition Foreign manufacturers gain experience Compete in export markets 4. Import competition Foreign producers obtain economies of scale Compete in quality and undersell domestic company in domestic market. Due to this dynamic business setting, the trade policy has to emerge and adapt it self to international demands and cause economic development. Comparative advantage theory of David Ricardo was the basis of free trade policies. Opponents of these policies argue that comparative advantage has lost its importance in a globally shrinking world. It is commonly believed Tariff and Non-tariff barriers, Miscellaneous Protection Techniques – Dumping, Subsidies, Cartels, and Commodity Agreements that free trade developed o the model of comparative advantage compels trade on less...
Words: 2566 - Pages: 11
...The Political Economy of International Trade Chapter Outline OPENING CASE: Why Are Global Food Prices Soaring? INTRODUCTION INSTRUMENTS OF TRADE POLICY Tariffs Subsides Country Focus: Subsidized Wheat Production in Japan Import Quotas and Voluntary Export Restraints Local Content Requirements Administrative Polices Antidumping Policies Management Focus: U.S. Magnesium Seeks Protection THE CASE FOR GOVERNMENT INTERVENTION Political Arguments for Intervention Country Focus: Trade in Hormone-Treated Beef Economic Arguments for Intervention THE REVISED CASE FOR FREE TRADE Retaliation and Trade War Domestic Politics DEVELOPMENT OF THE WORLD TRADING SYSTEM From Smith to the Great Depression 1947-1979: GATT, Trade Liberalization, and Economic Growth 1980-1993: Protectionist Trends The Uruguay Round and the World Trade Organization WTO: Experience to Date The Future of the WTO: Unresolved Issues and the Doha Round Country Focus: Estimating the Gains from Trade for America FOCUS ON MANAGERIAL IMPLICATIONS Trade Barriers and Firm Strategy Policy Implications SUMMARY CRITICAL THINKING AND DISCUSSION QUESTIONS CLOSING CASE: Agricultural Subsidies Learning Objectives 1. Describe the policy instruments used by governments to influence international trade flows. 2. Understand why governments...
Words: 7113 - Pages: 29
...I. Introduction Free trade, the ever present driving force behind our national and world economy, is a trade policy embroiled in controversy. It is considered by most economists to be an almost perfect trade policy, barring a few negative effects. Free trade has been shown to increase production, output and income levels in an economy. However, there are many people that view free trade as destroyer of economies and a catalyst of poverty. Critics of free trade have pointed out that in the short-run, free trade causes a loss of jobs which in turn causes a rise in poverty levels. It is interesting to note that the argument for free trade and the argument against free trade are inverses of each other. Proponents of free trade see it as a tool to stimulate an economy while detractors see it as a policy which exacerbates poverty, causes dependency and reduces economic stability. In general, there is no consensus on free trade. Economists see free trade as the devil that we know. While imperfect, it is the best we have to work with. Popular opinion sees free trade as a cause of inequality. Even though it alleviates poverty and causes economic stimulation in the long-run, it can cause the exact opposite in the short run. The pros and the cons of free trade must then be weighed, which will then allow us to determine if free trade is truly a beneficial trade policy. Therefore, this discussion will weigh the benefits and harms of free trade and will prove that...
Words: 346 - Pages: 2
...Cons of Free Trade I. Introduction Free trade, the ever present driving force behind our national and world economy, is a trade policy embroiled in controversy. It is considered by most economists to be an almost perfect trade policy, barring a few negative effects. Free trade has been shown to increase production, output and income levels in an economy. However, there are many people that view free trade as destroyer of economies and a catalyst of poverty. Critics of free trade have pointed out that in the short-run, free trade causes a loss of jobs which in turn causes a rise in poverty levels. It is interesting to note that the argument for free trade and the argument against free trade are inverses of each other. Proponents of free trade see it as a tool to stimulate an economy while detractors see it as a policy which exacerbates poverty, causes dependency and reduces economic stability. In general, there is no consensus on free trade. Economists see free trade as the devil that we know. While imperfect, it is the best we have to work with. Popular opinion sees free trade as a cause of inequality. Even though it alleviates poverty and causes economic stimulation in the long-run, it can cause the exact opposite in the short run. The pros and the cons of free trade must then be weighed, which will then allow us to determine if free trade is truly a beneficial trade policy. Therefore, this discussion will weigh the benefits and harms of free trade...
Words: 352 - Pages: 2
...Arguments in Favor The most common argument in favor of free trade is that it permits the market to most efficiently price goods and services on the largest possible scale. As governmental barriers to trade---such as taxes, tariffs and regulations---are lifted, proponents say the cost of providing a service or producing a product will decrease, and this lower price would be a net good for society. In general, large-scale production is more efficient than small-scale production and leads to greater profits, which drive further efficiencies, including more advanced technology. Some political scientists say free trade improves national security by making nations so economically interdependent that armed conflict becomes an increasingly remote possibility. Furthermore, some say that the right to labor includes the right to engage in some degree of market capitalism that includes trading with the partners of one's choice, irrespective of national borders. As individual entrepreneurs pursue their own self-interest, they accumulate capital that can be used to subsidize the arts and culture within their communities. Sponsored Links GlobalSources.com Source For Verified Manufacturers & Wholesale Suppliers. Register Now! www.GlobalSources.com Arguments Against Opponents of free trade argue that the economic benefits of trade are outweighed by the hidden costs. For example, free trade tends to promote the formation of large business enterprises such as multinational corporations...
Words: 473 - Pages: 2
... Discuss in detail by providing sound arguments to support your choice of response. A world leader is ac company which can own the maximum market shares or which can have a market position because of the part of the services or the products. Now if the new comer or any other company bench mark itself against the work leader consequently it will try to improve the efficiency and productivity in comparison to principal company which ultimately enhances the company’s performance. 2. What are the essential arguments in favor of free trade and against free trade? Favor Free Trade - Law of comparative advantage - Increased competition leads to lower prices for consumers - Open economies lead to increased technological development and innovation - Higher standard of living - Better understanding of nations Against Free trade - Free trade benefits US companies rather than citizens - Environmental exploitation - Human Rights issues - Reduction in domestic wages - Lower domestic competitiveness as a result of developing facilities elsewhere Ch 2 3. Is it possible to estimate the gains from trade? Explain when it can bet estimated and when it can’t. Since the early 1600s Mercantilists has developed theory for measuring gains from trades with the assumption that a trade surplus would eventually lead to increase domestic productiona nd employment. In the 18th century used David Hue’s price-specie-flow doctrine states trade is good for the short run but now for...
Words: 737 - Pages: 3
...A Report On “Impact of protectionist trade policy on the domestic industry and economy” Course Name International Economics Course Code FIN: 2210 Submitted To: Shaikh Masrick Hasan Lecturer Department of Finance Jagannath University Submitted By: Sohel Rana On behalf of Group-06 2nd Year 2nd Semester, 6th Batch Department of Finance Jagannath University Date of Submission: 22-02-2014 Group Members SL. NO. | NAME | ID NO. | 1 | SOHEL RANA | B 110203076 | 2 | NURNOBY RAHMAN | 115234 | 3 | UZZWAL HALDER | B 110203046 | 4 | IMAM HOSSAIN | B 110203026 | 5 | FARHANA BHUIYAN | B 110203106 | 6 | SUMAIYA YASMIN | B 110203104 | 7 | HAFIZUR RAHMAN | B 110203025 | 8 | FATEMA AKTER | B 110203006 | 9 | KHALILUR RAHMAN | B 110203055 | 10 | TOHIDUL ISLAM | B 110203024 | Letter of Transmittal Shaikh Masrick Hasan Course Coordinator Money and Banking Dept. of Finance Jagannath University Subject: To submit a report on “Impact of protectionist trade policy on the domestic industry and economy” Sir With a great respect, we are informing you that we have prepared a report on “Impact of protectionist trade policy on domestic industry and economy.” We feel great pleasure for submitting this report to you, which will...
Words: 5333 - Pages: 22
...Economy of International Trade Learning objectives • Describe the policy instruments used by governments to influence international trade flows. • Understand why governments sometimes intervene in international trade. • Articulate the arguments against strategic trade policy. • Describe the developments of the world trading system and the current trade issues. • Explain the implications for managers of developments in the world trading system. This chapter focuses on the political systems and tools of trade policy. The major objective of this chapter is to describe how political realities shape the international trading system. With an introduction to tariffs, subsidies, and the development of the world trading system, the chapter describes the evolution of the World Trade Organization and its impact on the global business environment. While in theory many countries adhere to the free trade ideal outlined in Chapter 5, in practice most have been reluctant to engage in unrestricted free trade. The US continues to restrict trade in technological and militarily sensitive products as well as in textiles, sugar, and other basic products in response to domestic political pressures. OUTLINE OF CHAPTER 6: THE POLITICAL ECONOMY OF INTERNATIONAL TRADE Opening Case: United States Cotton Subsidies and World Trade Introduction Instruments of Trade Policy Tariffs ...
Words: 5896 - Pages: 24
...Trade policy A ‘‘‘commercial policy’’’ (also referred to as a trade policy or international trade policy) is a set of rules and regulations that are intended to change international trade flows, particularly to restrict imports. Every nation has some form of ‘‘‘trade policy’’’ in place, with public officials formulating the policy which they think would be most appropriate for their country. Their aim is to boost the nation’s international trade. Example ‘‘‘European Union’’’, Mercosur committee etc. The purpose of trade policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies. Trade policy can involve various complex types of actions, such as the elimination of quantitative restrictions or the reduction of tariffs. According to a geographic dimension, there is unilateral, bilateral, regional, and multilateral liberalization. According to the depth of a bilateral or regional reform, there may be free trade areas (wherein partners eliminate trade barriers with respect to each other), ‘‘‘custom unions’’’ (whereby partners eliminate reciprocal barriers and agree on a common level of barriers against no partners), and free economic areas (or deep integration as in, for example, the European Union, where not only trade but also the movement of factors has been liberalized, where a common...
Words: 1390 - Pages: 6
...“Why do most states try to restrict trade?” ECOP1003 31st August 2009 Jeffrey Chiang 309021863 Literally, “trade is the oldest and most important economic nexus among nations” (Gilpin 1987: 171); in fact, “trade along with war has been central to the evolution of international relations” (ibid). Trade has been considered essentially important for centuries for the reason that it provides wealth from the taxation of trade for politicians and the states (Gilpin, 1987). In the years since World War II, world trade has technically become free trade (Economist, 2009). By definition, free trade is a term that is used to describe “the ability of people to undertake economic transactions with people in other countries free from any restraints imposed by governments or other regulators” (Economist 2009: 1). As a result of free trade, “the volume of world merchandise trade at the start of the 21st century was about 17 times what it was in 1950, and the world's total output was not even six times as big” (ibid). Though free trade gives advantages to developed nations and businesses, it is somehow a destructive tool for developing countries and firms. Therefore, mercantilists oppose liberal trade and support the idea of limiting trade to make sure that a country or firm does not take advantages over another in a negative way. Though free trade has grown rapidly since 1950 and has been extremely beneficial to various states, “trade has another and more controversial effect, and...
Words: 1297 - Pages: 6
