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Protectionist Policies

During the recent rise of global trade and industrial growth in developing nations, the countries started realizing the long term merits and demerits of free trade. The disputes on free trade among nations also raised and in order to maintain the demand and supply needs, free trade is encouraged to the large majority. On the other hand, free trade generates a zero sum game i.e. loss for one country and benefits for the other. Therefore, mercantilist perspective argues for the protection of national industries and trade by reducing imports and increasing exports.

Protectionism is a phenomenon that shows the attempts of a state to impose limitations or constraints for the import of certain goods from other countries. This policy of largely adopted to safeguard the interests of local industry and agricultural sector by heavy duty on imports and subsidization of exports in the long run. Through protectionist policies, government protects domestic industries from foreign products competition through imposing taxes on imports (tariff), subsidization of exports, import quotas, and other non tariff measures (Anderson and Peter 2003).

The other measures of protectionism involve embargoes, administrative barriers, and exchange controls for the international trade in the country. Another form of protectionism is formation of customs unions in which countries form a cartel to protect regional or strategic trade like EU, NAFTA, and ASEAN (Baldwin 2009). Administrative barriers for the foreign trade involve stringent safety and security checks on the products of foreign countries that discourage the importers. For instance, the barriers of dairy products and fruits trade in Australia and European Union from Asian countries like that of China and India.

The reasons given in favor of protectionist policies are included limitation of foreign trade to encourage the local producers and farmers to exploit the potential of local and foreign markets. The local suppliers are encouraged to support industries as compared to overseas outsourcing. These policies are against the concept of free trade and open tariff policy of World trade organization (WTO). EU supported the free trade within European countries but not with other continents especially from Asia and Africa (Evenett 2010). In order to support the underperforming local sector, governments have to provide financial assistance in the form of subsidies to the local producers. The best example for this case is protection of local farmers in EU under Common Agricultural Policy (CAP) which is blamed to be responsible for the damage of trade incomes to the farmers in undeveloped countries like that of Asia and Africa. Antidumping laws against China have given trade deficits of billions of dollars to china export industry in EU countries.

The favored arguments for these policies are based on the notion that certain sectors or economies are underperforming in spite of the potential of growth, therefore it is the responsibilities of state to support these sectors to safeguard the employment and trade opportunities for local population. The protection of infant industries or strategic importance industries like that of weaponry has made governments to put short term sanctions or high tariffs on imports (Baldwin and Simon 2009). At times, when local industry achieves the comparative advantage then barriers of import relaxed like in the case of Indian automobile industry, import of luxurious models were allowed only after the strengthening of local automobile industry.

On the other hand, critics of this phenomenon argue that these tariff and non tariff protections to the local trade actually increase the tax burdens of local consumers. When government pays

subsidies to local industry and farmers, the local consumers not only pay the increased price of the goods but also pay extra taxes to the government. Moreover, this protection from imports increases uneven income distribution in the country as poor consumers cannot have advantage of cheap products from other countries and they are ended up in paying high to the local protected industry (Baldwin 2009). Another argument against this protection holds that avoiding international competition destroys the theology improvement and personnel skills building in that industry. Also, protecting local employment through import tariff worsen off in long rum as local employees cannot become better off due to these imposed taxes.

In conclusion, this paper has presented both views of economy in case of protectionist policies in a country. It is evident from above discussion that the protectionist policies are not achieving their aims in the long run and create losses for the other economies especially for developing countries. The imposition and administration of these policies are difficult to manage and its benefits are also not achieved for the local consumers. Protectionism is used as second choice to reduce structural unemployment and avoid the loss of trade balance of payments. Also, these policies are against the free trade agreements of WTO and reduce the comparative advantages of a country.

References
Anderson, J. and J Peter N. (2003), The Mercantilist index of trade policy, International Economic Review, 44:627-649. Baldwin, R. (2009), The Great Trade Collapse: Causes, Consequences and Prospects, A VoxEU.org Publication. Baldwin, R. and Simon E. (2009), The collapse of global trade, murky protectionism, and the crisis: Recommendations for the G20, A VoxEU.org Publication. Evenett, S. (2010), Africa resists the protectionist temptation: The fifth Global Trade Alert report, VoxEU.org, 28 May.