StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Trade Protectionism And Worldwide Economic Contraction - Case Study Example

Cite this document
Summary
Economic protectionist law is one that is enacted to shield locals from out-of-state competition. The paper "Trade Protectionism And Worldwide Economic Contraction" highlights economic protectionism, and explains the rationale for governments implementing protectionist policies…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97% of users find it useful
Trade Protectionism And Worldwide Economic Contraction
Read Text Preview

Extract of sample "Trade Protectionism And Worldwide Economic Contraction"

Trade Protectionism And Worldwide Economic Contraction Introduction “Laws aimed at insulating the state from interstate competition involve what the Court has called simple Economic Protectionism” (May & Ides 350). However, under the dormant Commerce Clause such laws are invalid. The Economic Clause prevents a state from shielding its people from the economic consequences of free trade among the states. This is because alleged protectionist laws involve discrimination against interstate commerce. A finding of economic protectionism by the courts has fatal consequences for the industry, the government, the employees and other stakeholders, hence courts often hesitate to conclude that a statute is tainted by the evils of protectionism. Economic protectionist laws are struck down on the basis that the state has not used a more equitable means of achieving its goal. Thesis Statement: The purpose of this paper is to investigate economic protectionism, explain the rationale for governments implementing protectionist policies and evaluate whether these policies were successful or otherwise. Economic Protectionism: Its Rationale and Extent of Success An economic protectionist law is one that is enacted to shield locals from out-of-state competition. For example, when the purpose of a law is to shield Alaska’s infant timber processing industry from the effects of interstate and foreign competition, it is deemed as invalid. Similarly, a state’s labeling law in the apple growing industry would be considered to be economic protectionist if it were meant to prevent apple growers in other states from selling their fruits in the former state. Thus, where economic protectionism is a law’s ultimate goal, the measure can be held to be unfounded. However, if the apple growing state argues that requiring the use of a specific grade is a reasonable method to protect consumers against fraud and deception, the court would most likely accept this argument (May & Ides 350). On the other hand, ecomomic protectionism is also considered to be damaging if it is merely a means, a stepping-stone, or an intermediate goal towards the attainment of a legitimate end. For example, “a genuine quarantine law that bans the importation of diseased crops or animals is not economic protectionism if it was adopted for health reasons” (May & Ides 352) even though it has the incidental effect of shielding local sellers from competion from other states. Although quarantine laws are not invalid in themselves, they may be invalidated if they fail to meet one of the other requirements of the dominant Commerce Clause analysis. The Argument Against Economic Protectionism Support for continued trade liberalization may be declining, as the results from recent polls and political rhetoric suggest. This development is a matter of concern. A shift away from comparatively open global trading system that is currently in place would enforce substantial economic losses to most countries. International trade raises the standard of living in all countries. Consumer well-being is increased by lower prices on imported products and greater variety of products available in the market. Further, production efficiency is improved by specialization based on comparative advantage and increased competition from foreign businesses, thereby raising the country’s gross domestic product (GDP). Firms also get access to foreign capital goods that generally contain new technologies; this further improves productivity (Kroll 9-10). In relation to the effect on jobs and wages impacted by international trade, the evidence indicates that trade can lead to the displacement of workers in industries that compete with imports. On the other hand, this adverse outcome is relatively small in comparison to overall increase in employment opportunities. In the United States although displaced workers face adjustment costs, overall the country “has experienced robust total employment growth in the presence of expanded trade” (Kroll 10). Additionally, research reveals that international trade has a comparatively low effect on wages. Greater wage differences have been brought about by skill-based technology change than by international trade. Although international trade drives significant changes in the economy, the costs of international trade restrictions on the basis of economic protectionism are higher than the limited benefits these restrictions produce to import-competing industries. According to Humpage (p.218), New Zealand like Australia had a long history of centralised award bargaining that contributed to work being considered as a social right. From the 1930s, governments also ensured decent work through other methods based on economic protectionism including agricultural subsidies and import controls. Rapid financial and trade deregulation from 1984, and transformation of the labour market from 1991 “offered employees greater flexibility but reduced employee security at a time of high unemployment and benefit cuts” (Humpage 218) The Argument for Enhancing Countries’ Own Economies In a booming economy, foreign imports of goods and services are beneficial in raising living standards and promoting spending without inflation. On the other hand, in an economic downturn, the politicians tend to become protectionist and economic isolationists by putting up trade barriers. Under such circumstances, foreign competition becomes a convenient scapegoat for the crisis, although the reasons for the crisis may be purely domestic in nature. With the economic downturn, every country was adversely affected, a severe recession turning into a worldwide economic depression. This is based on the fact that trade protectionism in the modern world is the equivalent of harming one’s own self; and it leads predominantly to a spread of poverty and economic dislocations (Tremblay, 2009). Most modern economies are interrelated, and as compared to the economic depression of the 1930s, today economic integration between countries is much more advanced and wide-spread. The current global financial crisis is causing a reduction in world trade, a lowering in commercial bank trade credits and a drop in private investments. “The decline will particularly hurt large export-led economies such as Mexico, Germany and Japan” (Tremblay, 2009). Economic protectionism is an important issue also for Canada, the United States’ most important trade partner. Conclusion This paper has highlighted economic protectionism, explained the rationale for governments implementing protectionist policies and assessed the success of these policies. The evidence indicates that economic protectionism causes more adverse outcomes than benefits. Further, it is essential to learn lessons from the past, and governments should resist exporting their economic problems abroad. They should work instead to enhance their own countries’ economies without resorting to protectionist interventions. Tremblay (2009) supports this view, and states that “to avoid sending the world economy into a self-reinforcing contraction that would hurt everyone”. Works Cited Humpage, Louise. Radical change or more of the same? Public attitudes towards social Citizenship in New Zealand since neoliberal reform. Australian Journal of Social Issues, 43.2 (2008): pp.215-223. Kroll, Robert. Trade, protectionism and the U.S. economy. CATO Institute. Retrieved on 23rd November, 2011 from: www.cato.org/pubs/tbp/tbp-028.pdf May, Christopher N. & Ides, Allan. Constitutional law national power and federalism: Examples and explanations. New York: Aspen Publishers. (2007). Tremblay, Rogrigue. Trade protectionism and worldwide economic contraction. Centre for research on globalization. Retrieved on 23rd November, 2011 from: http://www.globalresearch.ca/index.php?context=va&aid=13760 Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Economic Protectionism Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1437775-what-do-you-understand-by-economic-protectionism
(Economic Protectionism Essay Example | Topics and Well Written Essays - 1000 Words)
https://studentshare.org/macro-microeconomics/1437775-what-do-you-understand-by-economic-protectionism.
“Economic Protectionism Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/macro-microeconomics/1437775-what-do-you-understand-by-economic-protectionism.
  • Cited: 0 times

CHECK THESE SAMPLES OF Trade Protectionism And Worldwide Economic Contraction

The Various Impacts of Global Financial Crisis on Trade Mechanisms

From the paper "The Various Impacts of Global Financial Crisis on trade Mechanisms" it is clear that the Global Financial Crisis had an impounding effect on the international trade mechanisms.... One of the most obvious effects of GFC on trade was the decline in demand for goods and services.... nbsp;… The effect of GFC on merchandise trade flows was quite alarming in nature.... Mercantilism This theory of international trade existed in the mid of 16th century....
8 Pages (2000 words) Case Study

The cross section of Globalisation

In this paper we are going to examine the cross section of Globalisation by first probing its very interpretation, inception and then highlighting subsequent conflicts that has emerged under the aegis of World Trade Organization, its share in current economic crisis and dearth of willingness in light of the trust deficit.... The ensuing panic that has spread out of the economic meltdown is tempting enough for nations to reverse gains of open policies by reverting back to protectionist approach....
11 Pages (2750 words) Essay

Quality And Export Products Of Ethiopian Trade Point

This piece of work shows the socio-economic adversities which can impact farmers who produce coffee in a developing country, when international trade regulations outside of the farmers' control, impact world coffee prices and therefore the earnings of Ethiopian coffee farmers.... Ethiopia's distinct and mild Arabica coffee, however, is some of the most aromatic and sought after coffee beans worldwide.... The paper "Quality And Export Products Of Ethiopian trade Point" examines the impact of international trading regulations as they now exist, on the activities of Ethiopian coffee farmers....
14 Pages (3500 words) Case Study

Is Free Trade Good or Bad for the American Economy

The benefits and drawbacks of adopting a worldwide system of free trade are the subject of heated debate, but most economists agree that free trade… The establishment of free trade has been compared to the improvement of farming equipment and factories, which made many jobs obsolete and caused economic upheaval while being implemented, but ultimately was deemed an (Odell, 27) Because it is generally agreed upon that free trade improves aggregate wealth, opponents tend to be those who would personally suffer, such as business owners whose businesses would be unable to compete with foreign rivals....
6 Pages (1500 words) Essay

The great depression

The great depression which caused a worldwide economic recession beginning from 1929 and lasting for nearly 10 years is considered to be the longest and most severe depression to have occurred in industrialized countries.... However, the depression initiated several policy responses to change the economic downturn.... Though it had its origins in the United States, it… The causes which led to such a catastrophic depression include a decline in consumer spending, financial instability and panics such as the stock market crash and banking failures, the gold standard The depression drastically changed living standards worldwide as people suffered losses of wealth and regular income....
5 Pages (1250 words) Research Paper

How Might Hegemons Encourage the Proliferation of Regimes among Other States

From the paper "A True Hegemon" it is clear that there are many potential rationales for why regimes propagate as a direct response to the influence and authority of hegemons supported by the superior military, cultural, industrial, and economic advantages held by the hegemon.... The cultural hegemonic worldview is therefore successful (largely) due to the economic, military-related, or politically-oriented dominance maintained by the hegemon.... Hegemons, due to their economic or military-related superiority over other states and their ability to influence worldwide cultural norms, are often opposed by other states....
11 Pages (2750 words) Essay

The Global Economy

hellip; The core idea of the global economy is derived from the concept of globalization that facilitates international trade and economic activities in such a way that economic occurrence of one country is bound to influence the condition of world economics.... trade barriers are the measures appointed by governments and other public authorities for the purpose of making the imported goods and services less competitive as compared to locally produced goods....
8 Pages (2000 words) Assignment

Trade Investment and Policy in Asia

However, there are risks in tapping global markets because markets can be slow to reacting to changes in the economic conditions or they may over-react with brutal force.... The Korean government took economic liberalization measures in line with the gradual integration of Korea into the global system.... n 1995 Korea adopted globalization as its national goal and pursued it in different sectors such as education, market and economic systems, politics, environment and culture....
9 Pages (2250 words) Article
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us