Effects of Trade Protection Policies - Assignment Example

As an initial matter, it is important to define what is meant by trade protection policies. In general, trade protection policies are barriers to free trade. These types of policies may take the form of quotas, tariffs, or more sophisticated trade policies and laws. They are often enacted to protect specific industries from increasing imports and international competition. In the American context, from a historical point of view, the most protected industry has been the steel industry. Other industries that have lobbied for and received some benefits from trade protection policies are industries involved in textiles and automobiles.

President Bush, a frequent proponent of free trade, was recently criticized for bowing to political interests and signing trade protection legislation in order to protect votes. More specifically, "Bush moved last year to protect steel manufacturers with large operations in political battleground states such as Pennsylvania, Ohio, Illinois and West Virginia by imposing three-year, 30 percent tariffs on foreign imported steel to protect an industry that employs more than 125,000 workers nationwide" (Powell, 2003: np).

In short, political influences are extraordinarily strong in the trade protection debate. The question presented, however, is not what. The answer is no. Economic studies demonstrate over and over again that trade protection policies do not save America jobs in the long run. There may be short term employment stabilization in a particular state or in a particular industry. These short-term employment benefits, however, rarely translate into longer-term forms of stabilization. Indeed, there are tremendous costs associated with trade protection policies.

In the steel context, for instance, protecting the steel industry results across the board increases in steel prices for all other American companies using steel as a raw material. The short-term stabilization of jobs in one industry, in effect, results in employment threats to many more workers in other industries. As stated by Griswold, a leading American Commentator on trade protection policies, Quotas and duties on imported steel will not "protect" the U.S. industry. They will profit only one relatively small sector at the expense of others.

Some of America's largest industries -- construction, industrial machinery, automobiles, and durable goods -- swallow huge quantities of steel as an intermediate input to their final products. General Motors, General Electric and Caterpillar each buy more than 600,000 tons of steel a year. Higher steel prices will damage sales and profitability across a broad swath of the American economy, endangering jobs in industries that employ 40 times as many workers as does the domestic steel industry (The Government's no-win war: np).

The reality, therefore, is that trade protection policies, though politically popular, do not save jobs in the bigger American economy.