Should Trade Restrictions Be Imposed in the US - Research Paper Example

Table of contents Introduction ……………………………………………………………………………2 The term “trade restriction”……………………………………………………………2 The reasons of imposing trade restrictions…………………………………………….3 Contra argument ……………………………………………………………………….4 Side effects of trade restrictions………………………………………………………. 6 Conclusion……………………………………………………………………………..7 Name Professor’s Name Subject Date Should trade restrictions be imposed in the United States? Introduction Trade has always been a very important part of relations between countries in the world. It is really impossible to do without it. Trade allows countries share the products they produce and have profit. It helps people succeed in the areas they like, provides new opportunities to develop skills and get new experience. In the modern world as a result of globalization international trade became more active. Every healthy economy should benefit from trade. However, this process can’t flow naturally and, certainly, should be regulated. A trade restriction represents deliberately imposed limitation on goods or services import/export. These measures are usually applied in order to protect the citizens of this or that country from complications caused by export/ import of different services or goods (Gu, 2010). The term “trade restriction” The term “trade restriction” remains controversial primarily because the limitations are not always imposed in order to protect consumers. Sometimes this is done in economic purposes as such restrictions alter the goods/services’ cost and some industries benefit from it. The perfect example of trade restriction made with the purpose of consumer protection is the law that forbade importing beer in Germany, if it was not produced in correspondence with the purity law. This was done in order to protect German citizens from low quality beer and, notwithstanding that this law was officially abolished, breweries continue to follow if voluntarily. The causes of trade restrictions can be very different and the given paper will analyze them and try to determine in what cases these restrictions should be imposed. The reasons of imposing trade restrictions Notwithstanding that free international trade is strongly supported, every state set up some barriers. The presence of such barriers is usually explained by the effort to protect the organizations and the economy of a certain state from the competition. “Historically, the most important trade barriers have been tariffs (taxes on imports) and quotas (limits on the number of products that can be imported into a country). In recent decades, however, many countries have used product safety standards or legal standards controlling the production or distribution of goods and services to make it difficult for foreign businesses to sell in their markets” (Impact of the World Economy, Barriers to Trade). The country usually applies such measures in order not to have the high number of foreign firms at the market. The necessity of such restrictions is rather controversial as they have multiple side effects (Gu, 2010). The most important reason of imposing trade restrictions is protecting employment sector. Foreign countries may have better trade opportunities in some sectors and this may increase the level of unemployment in the United States. Also it is considered to be essential to protect people from cheap foreign labor. However, this issue is rather controversial as the citizens, especially in developing countries, usually consider it to be a violation of their right to choose where to work. They accuse the government in closing their way to welfare and depriving them of the new opportunities (Restrictions on International Trade). “During recessions, when national unemployment rates are high or rising, workers and firms facing competition from foreign companies usually want the government to adopt trade barriers to protect their industries. But again, historical experience with such policies shows that they do not work. Perhaps the most famous example of these policies occurred during the Great Depression of the 1930s. The United States raised its tariffs and other trade barriers in legislation such as the Smoot-Hawley Act of 1930. Other nations imposed similar kinds of trade barriers, and the overall result was to make the Great Depression even worse by reducing world trade” (Impact of the World Economy, Barriers to Trade). The barriers are also set to protect national interests. For example, if a country manufactures weapons, it will not sell it to enemies. Moreover, no government wants to rely on import even if imported good are cheaper. The tariffs are usually set in order to protect the economy and domestic production (Restrictions on International Trade). The restrictions are also justified by the argument that free trade is not fair as different countries have different laws and different norms, especially concerning environmental issues. Here it is essential to mention that developed countries tend to set up stricter pollution-control policies in comparison with developing countries. Free trade gives developing countries some benefits over developed ones thus restrictions are necessary. "If an industry generates a great deal of pollution, it may be more efficient to locate it in a poor country than in a rich country. In effect, a poor country’s lower demand for environmental quality gives it a comparative advantage in production of goods that generate a great deal of pollution”. Free trade gives developing countries the benefits, which they should not have as these benefits propagate low pollution-control policies (Restrictions on International Trade). Contra argument Notwithstanding that the necessity of trade restrictions may seem proved, the issue can be considered from different perspective. Some experts argue that free trade has many benefits and competition is also beneficial, thus the state should not impose serious restrictions to avoid competition as it is beneficial for consumers (Sawyer & Sprinkle, 2006). Really, when the competition is high, the prices for goods and services inevitably become lower and productivity increases. Moreover, the level of unemployment also decreases as new jobs are created both in a state that produces goods and in a state where they are transported. People are able to enjoy high-quality and cheap goods and services. The opponents of trade restrictions state that high tariffs are set by the government deliberately to receive money and make imported goods expensive that makes people dissatisfied. Tariff on tea is a perfect example of tariff that led to unrest in the masses (Henretta et al, 2002). Moreover, as it was mentioned above, restrictions often prevent people from receiving new employment opportunities. In the United States as in the developed country such restrictions are grounded as they are aimed at protecting people from cheap foreign labor, however in many developing countries such measures usually evoke unrest in the masses. “While there are special reasons for limiting imports or exports of certain kinds of products—such as products that are vital to a nation’s national defense—economists generally view trade barriers as hurting both importing and exporting nations. Although the trade barriers protect workers and firms in industries competing with foreign firms, the costs of this protection to consumers and other businesses are typically much higher than the benefits to the protected workers and firms. And in the long run it usually becomes prohibitively expensive to continue this kind of protection” (Impact of the World Economy, Barriers to Trade). Really, in many cases even in the United States it would be better to abolish some restrictions and give people chance to work. Some of such restrictions, which deprive people of the opportunity to benefit from what globalization can offer, appear to be harmful for the whole country. Thus, the government should not deprive people of the chance that could improve their life and also bring benefits to the domestic country. Unfortunately, the government prefers to close the eyes on that fact imposing new restrictions. Globalization provides many opportunities and people should not be deprived of the chance to use them. “It often makes more sense to end the trade barrier and help workers in industries that are hurt by the increased imports to relocate or retrain for jobs with firms that are competitive. In the United States, trade adjustment assistance payments were provided to steelworkers and autoworkers in the late 1970s, instead of imposing trade barriers on imported cars. Since then, these direct cash payments have been largely phased out in favor of retraining programs” (Impact of the World Economy, Barriers to Trade). Side effects of trade restrictions A great number of barriers set with the purpose to protect consumers have undesirable consequences. For instance, the United States has very serious restrictions on food import. The main purpose of this barrier was to limit the import of food in order to protect Americans from harmful substances. In this case the restrictions were well-grounded, but there are many other barriers, which are useless, for example size restriction set in order to stop the import of Mexican tomatoes, which are smaller than those produced in the United States. Such measures made the prices on US tomatoes very high, thus the restrictions were cancelled. The same situation can be traced with sugar. The United States impose serious restrictions on import of sugar with the purpose of price increasing. The price for sugar in the United States is very high that makes people consume less sugar “The 2008 U.S. Farm Bill sweetened things for sugar growers even more. It raised the price they are guaranteed to receive and limited imports of foreign sugar so that American growers will always have at least 85% of the domestic market. The bill for the first time set an income limit—only growers whose incomes fall below $1.5 million per year (for couples) or $750,000 for individuals will receive direct subsidies” (Restrictions on International Trade). Conclusion Every state with healthy economy, no matter if it is developed or developing, should benefit from trade. Globalization provided many new opportunities every country tries to use. However, new market conditions also brought definite threats, which force the governments to impose trade restrictions. The conclusion can be made that trade restrictions should be imposed predominantly when they are directed on consumer protection. For example if they limit the import of food that contains substances, which are dangerous for human organism. In the United States as in the developed country restrictions should be imposed to protect citizens from cheap foreign labor. However, if we try to classify the restrictions it will become clear that the great numbers of barriers are set not with the purpose to protect people. Some restrictions are imposed in the United States in economic purposes such as providing certain benefits for an industry or make the price on some goods higher. Certainly, such measures very often have side effects and have to be terminated as they contradict with some internationally accepted norms. Some restrictions can be set to protect national interests but they again should not contradict with the interests of citizens of the state. Everything that is done by the government should follow two basic principles “do not harm” and act “in people’s favor”. Thus, consumer protection should be the top priority of trade restrictions legislation. Works Cited Gu, Mark. Should America Impose Trade Restrictions?, 2010 Retrieved March 30, 2013 from http://voices.yahoo.com/should-america-impose-trade-restrictions-5492131.html Restrictions on International Trade, n. d. Retrieved March 30, 2013 from http://www.web-books.com/eLibrary/NC/B0/B63/087MB63.html Sawyer, W.C., & Sprinkle, R.L. International Economics, Second Edition. by Pearson Education, Inc., Upper Saddle River, New Jersey, 2006 Henretta, J., Brody, D. & L. Dumenil. America: A Concise History. Volume I, To 1877. Bedford- St. Martin’s:Boston, 2002. Impact of the World Economy, Barriers to Trade., n.d. Retrieved March 30, 2013 from http://www.countriesquest.com/north_america/usa/economy/impact_of_the_world_economy/barriers_to_trade.htm Read More