Trade Policy Disaster in International Business - Literature review Example

?International Business Task: International Business Introduction The economic policies in Europe are shifting hastily. The emergence of the European Union has changed trading massively. The block has gained massive trading power owing to its massive bargaining power. This has enabled it to set standards for products that its member states should accept. The World Trade Organization (WTO) organization has sought to fight some of the global challenges by increasing trade. These challenges include unemployment, distribution of wealth, and underdevelopment in some nations. Additionally, the WTO has sought to realize objectives such as global economic integration and increase in global incomes. However, the WTO quest to promote free trade has encountered various challenges. These challenges include countries that trade under protectionist policies other countries have refused to open their economies totally. Despite the handicaps, WTO has accomplished some of its objectives. This is because there has been a gradual rise in the global trade (Bradford 2003, p. 30). WTO has sought to enhance free trade by campaigning that nations trade freely. However, it has not accomplished the above objective. This is because numerous nations have adopted various protectionist policies that have prevented free and fair trade. Additionally, bodies such as European Union have sought to protect their constituent nations by barring entry of certain comedies to this region. However, the political and trading block has also increased trade among its nations. Protectionism is the key hindrance to free trade in the world. UK has adopted various policies that prevent free trade. Some of the policies entail massive taxation, quotas and total ban. The adoption of such policies by nations has resulted from various reasons. Such reason primarily relates the saturation of the economy with cheap products that have pricing advantages. Despite the phenomenal trade increases that would occur on the elimination of protectionism, there would be negative economic implications. Countries would lose some of their sectors owing to importation of certain products into their economy (Bradford & Lawrence 2004). There are countries such as China, India and Brazil that produces certain products at lower cost owing to low expenditure of labour and other inputs. Exporters from such countries would have a competitive edge over most producers globally. Therefore, nations that experience higher cost in the production of similar goods would encounter reduced clientele. The cheap products would floods markets globally. As such, manufacturer in countries such as UK may suffer owing to flooding of the economy with such goods. The local industry in these nations would suffer greatly owing to free trade. Conversely, nations producing items at low cost would have a massive competitive advantage over their rivals. This would result in economic prosperity of such nations. Protectionist policies enacted by the UK government seek to protect its producers who are vulnerable to products subsidized by global powerhouses. This has been the key justification for the protectionist policies. Despite the justification by leading nations for enacting such policies, it is evident that they have been the key hindrance to free and fair trade. Leading nations incur higher cost since they pay higher remuneration. As such, their firms incur higher costs. This translates to higher prices. Irrespective of the quality of such product, they can compete with other gods owing to pricing. The above reason is solid for enacting protectionist policies (Chorev 2007, p.45). Free trade would increase entry of goods in all nations. As such, some of the industry would close down as detailed above since they cannot survive competition on the global front. The closure of these industries would culminate in job losses. One the key concerns of government is unemployment. If the government allows free trade, then there will be substantial job losses. Any government that would fail to prevent job losses will become extremely unpopular. Therefore, government enacts such policies to prevent job losses. Free trade would result in increased trade, which would result in the creation of more employment. Nonetheless, the distribution of employment would not be equal. Nations, which export more products, would have more opportunities than other nations. Additionally, a nation that experiences an increased demand for its services would witness an increase in the employment rate. The current governments should enact measures that will increase their economic output. Administration should also ensure that they have a competitive edge over their competition. The competitive edge would result in higher demand. This would result in more job opportunities as producer attempt to meet demand for their output on the globally. Overall, enacting protectionist policies will protect employment opportunities on the short run. However, there are economic measures, which can spur economic expansion resulting in higher opportunities on the long run (Facchini 2007, p. 78). The government has key objectives of promoting industrialization in the nation. This has been a key justification of protectionist policies. However, free trade may also contribute to industrialization since a nation can import cheap raw material from other nations. These inputs would provide the required inputs for increased production and industrialization. Free trading would not have some effects. However, the policy responses from the UK would be extremely vital in ensuring that they benefit from the free trade. The government should respond with policies and incentives that ensure that they protect and encourage industrialization (NIESR 2000, p. 25). Protectionist policies are not the only means to protect industries. As such, free trade would also open up other market, which the UK would export its products. Therefore, promoting industrialization is not a solid reason to enact protectionist policy in the UK since they are other ways to improve industrialization. The above reasons are central to the enactment of protectionism. However, some of the reasons do not provide credible reasons for protectionism. Many governments are afraid of the outcomes of free trade owing to the uncertainty that may result from such a trading environment. It is also vital to note that protectionist policies are key sources of taxation. Therefore, the UK government would prefer to capitalize on such policies to increase its incomes. The uncertainty associated with free trade emanate from the fact that smaller nations thinks that the bigger nations would be the key beneficiary of free trade. There is some truth in such a statement, but there would also be key opportunities for the smaller nations to expand their trade (Irwin 2012, p. 154). In the wake of the recession, jobs have decreased while investors have winded up their operations. As such, most government have opted to adopt protectionist policies. In nations like UK where entities incur higher remuneration overheads, entities are opting to import employees that demand lower wages. Moreover, there is minimal economic growth, which denotes the full extent of the global crisis. Given the circumstances, the protectionist policies are vital. Protectionist policies will protect the present industries and earn the country income. Overall, the UK has increased its protectionist policies amid the economic crisis (Ito & Krueger 1993, p. 231). In the present economic crisis, many critical industries may close down. Therefore, it is essential to protect key industries. These essential industries would face phenomenal challenges in a free market. It is crucial that the government enacts protectionist policies for such industries. Owing to the crucial nature of the output of certain industries, it is critical that their products are availed form local entities. Some of the industry’s product may contribute to the security of the nations. As such, foreign businesspersons can sabotage national security by intentionally by failing to supply such items. Some of the nations utilize protectionist policies to shape other forms of polices such as politics. Subsequently, a nation can adopt protectionism to cause an interruption in a country. The elite nations have utilized protectionism to necessitate policy change among rogue nations. Once a country such as the UK adopts such a stand, the rogue nation will have reduced incomes. This will result in reduced resources for the rogue government. The decreases in resources will make the government dysfunctional. If the nations produce substandard goods, then this is an apposite strategy to utilize in encouraging better quality. The government should adopt protectionist strategies against such products. This would result in the entity, which produces such commodities making losses. That entity would subsequently invest in better technology to produce high quality products to suit this nation’s clientele (Le, Minford & Nowell 2009). The European Union has utilized the above strategy in determining nations that can export into this union. The European Union denotes an organization with massive bargaining power. Consequently, if it adopts protectionist policies against any country then that country will suffer massively. Similarly, if it wants a rogue nation to change its policies, it utilizes such polices to ensure the nations conforms (Messerlin 1990, p. 462). Conclusion Protectionist policies denote measures that the government undertakes to block free trade. These measures are undertaken in disregard to WTO’s objective to facilitate free international trade. International trade has grown rapidly in the past years. However, not all nations are willing to open up their economy to free trade. As such, protectionist policies enacted are the key hindrance to progress of free trade. The reasons for such policies vary. Some nations seek to protect their industries, employment opportunities. However, these are not sufficient reason to enact such measures since free trade would create numerous opportunities. In the current recession, there is minimal economic growth hence; the UK has increased its protectionist policies to protect its economy. Protectionist policies also enable shaping of protectionist policies globally (Minford, Mahambare & Nowell 2005, p. 304). Bibliography Bradford, S 2003, `Paying the Price: Final Goods Protection in OECD Countries', Review of Economics and Statistics, Vol. 85, no.1, pp. 24--37. Bradford, N & Lawrence R 2004, Has Globalization Gone Far Enough? The Costs of Fragmented Markets, Institute for International Economics, Washington D. C. Chorev, N 2007, Remaking U.S. Trade Policy: From Protectionism to Globalization, Cornell University Press, New York. Facchini, G 2007, Substitutability and Protectionism: Latin America's Trade Policy and Imports. World Bank Publications, Washington.  Irwin, D 2012, Trade Policy Disaster: Lessons from the 1930s, Massachusetts Institute of Technology. New York. Ito, T & Krueger, A 1993, Trade and Protectionism, Chicago University Press, USA. Le, M, Minford, P & Nowell E 2009, Economic Policy: protectionism as an elite strategy. Viewed on October 24, 2012 from Messerlin, P 1990, 'Anti-dumping regulations or pro-cartel law? 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