Free Trade Policy Has not Served Intended Economic Growth Aims - Coursework Example

Name: Institution: Question 6 Although free trade has largely been lauded in the developed economies as the primary anchor of international economic dynamics, it has not served developing countries especially regions in which industrialization is at infancy. Despite tremendous gains of globalization that have enforced the significance of free trade in economic growth, the concept appears to have been impartial and therefore unfavorable in economic growth context for which it was created in the first place. The inadequacy of free trade in leveraging rapid economic growth is reflected by the systematic refusal of adoption by some countries including some that had adopted it during the immediate post World War II period. This critical piece will detail and analyze the concept of free trade and its implications on economic growth, whilst explaining the positive aspects of protectionism. Free Trade Policy has not Served Intended Economic Growth Aims The primary dissent leveled against free trade is that in the international policy realm, the concept appears to have been unrealistic. The primary source of free trade problems is its fundamental assumption of a laissez-faire scenario in which government trade machinery play a non-intervening role. Additionally, the underlying policy situation that requires free trade to prevail under a perfect competition context is not only factually impractical but also makes the concept unable to deliver growth goals (Francois et al., 1993). The precedence set by the non-cooperation of countries in the adoption of free trade policy exacerbated full realization of the expansive economic development goals as enshrined. It is imperative that free trade only works in market contexts where governments give full and impartial cooperation and follow stipulated policy provisions. The imposition of trade barriers by larger economies against the smaller counterparts derails the ability of a free trade to generate any economic growth recipes. When an economy becomes over dependent on other countries for economic elements such as important production materials, food, and investments then its development track is compromised. This is to imply that by pushing overdependence on foreign governments for critical economic goods, free trade compromises a country’s growth potential. Free trade can drive an imbalanced economic development in a country. According to Cole (2000), free trade and the international economic specialization that characterize it distort the country’s development balance. This is to imply that the concept catalyzes imbalanced development of the already developed industries in which the country has a comparative advantage while other areas remain underdeveloped. By converting some countries or regions into dumping sites and making facilitating some countries to transfer harmful products into trade partner’s economies free trade derails the disadvantaged economies’ growth potential. In this context, cutthroat competition and concomitant dumping effects occasioned by free trade make it unhealthy for the suffering economies. The impact of free trade has been empirically experienced in developing economies into which industrialized countries float their below standard priced goods with an objective of taking over the markets (Cole, 2000). Cheaper goods deprive domestic industries the essential growth potential that is usually cultivated by sustainable profit margins. Additionally, free trade has increased the dumping effect that not only distorts prices locally but also reduces the potential of export payments that determines growth in an economy. Free trade increases the potential of harmful goods being produced and traded within a country, which contravenes an economy’s regulatory role over the nature and quality of imports from abroad. It is common knowledge that free trade hurts some groups in an economy by reducing their welfare by negatively influencing their per capita income statuses. In general, the increase in the production of trade goods in which the country has a comparative advantage that is often driven by the exportation demand reduces the output of the products in which the economy is comparatively unfit. This context creates an unequal income scenario in the country in that while the exporting groups increase their profiteering activities, the comparatively disadvantaged sectors that are trounced by competing importers experience income problems. Free trade hurts emerging and developing economies more compared with their industrialized counterparts. In a free trade scenario, the developed economies wage unfair and economically unhealthy rules of engagement that are often injurious to less developed countries (Cole, 2000). This premise underscores the precedent of unequal distribution of market gains. The stronger and more advanced economies tend to unequally channel the benefits of free trade more towards their side to the disadvantage of their less developed partners. Under the liberalization discourse, it is apparent that the rich countries craft terms of trade that favor them more over the poor countries and that derails the fundamental role of the concept as a conduit to economic growth. It is imperative that based on the aforementioned free trade dynamics, developing and emerging economies experience unequal balance of payment, which greatly undermines their growth and development potential. This premise points at the inherent advantages inherent in protectionism, which gives a country an opportunity to focus on development and trade options that result in beneficial market partnerships. There is small scale economic functions like the Indian cottage that play a tremendous role in driving economic growth and whose sustainability cannot measure up to the scale of influence form multinationals that only lead to the destruction of the “small” in the business. For example, the impact of small scale industries in India was destroyed by the free trade wave through which the British and Indian governments entered into unequal business agreements. Summarily, it is fair to argue that free trade does not provide the economic growth recipe that its proponents seem to preach. The most disadvantaged are the less developed countries whose industries are primarily at their infancy. In this context, free trade deprived the poor countries ability to create, develop, and protect their relatively young industries that are forced to compete with strongly resource endowed multinationals from the advanced economies. Important to note is that free trade not only compromises a country’s economic growth but also dissolves the peace functions when poor countries become over-dependent on rich nations: political autonomy is eroded. These arguments set the ground for the backward countries to appraise their trade partnership instruments that endanger their real economic growth interests for the benefit of the already grown economies. Protectionism appears to be the best antidote to the impartiality trade contexts inherent in the free trade concept. Protectionism and Economic Growth Long time ago, Frieden and Lake (2000) conceded the inevitable role played by economic protection policies in guarding and nurturing a country’s infant industries from unhealthy competition by long-established competitors from advanced economies. Industries bolster a country’s production synergy that increases the economy’s independence and thus sustainability. This premise underpins the inevitable need for a country to protect its just-established industries, which hold the key to economic progression, from retarding during the initial growth stages due to the inherent high costs. Industries require altruistic actions by the government in order to develop the capacity to compete internationally. Almost every developed country deployed protectionist policies at the infancy of industrialization to dissipate competition threats from other well-to-do economies. This premise explicitly explains the legitimate need for poor economies to protect their domestic firms from foreign competition in to give them room to consolidate their position. Noteworthy is the natural fact that protectionist policies should be engaged temporarily particularly in the context of infant industry sense, and should be relaxed after the purpose is duly attained. According to Frieden and Lake (2000), protection works effectively to the advantage of the economic growth when it is procured to safe establishing industries that have the potential to advance fast and sustainably. This implies that protectionist policies targeted at industries that lack the ability to evolve self sufficiency in the long-run does not deserve the government’s nod. A functionally viable protection policy needs to be discriminating in the face of long-run economic benefits for the country. Protection does not give any incentives for the infant industry to economize, but only limits unwarranted and unfair competition from well established foreign industries. Protection is advocated for by developed economies because it gives a premium on inefficiency, and it should only be assigned to industries that have full potential of transforming the economy through progressive growth activities. Conclusion This paper answered the question of whether free trade bears any economic growth recipes. The protectionist agenda, though marginally helpful in developed economic situations, has a tremendous role in helping viable industries consolidate their positions. Free trade works well in a market scenario in which all participating industries are fully developed and fairly perfect competition prevails. The often unfair and unhealthy trade agreements between economically stable and unstable countries derail any economic recipes deliverable by the free trade dispensation. Free trade facilitates the development of unfair trading partnerships in which poor countries increasingly turn into dumping sites and destinations for harmful products. In a free trade scenario, economic growth in poor countries is distorted by the imbalance in exports payments. Developing economies export much of its products before value addition thus earning relatively little income compared with the highly prized finished products that they import from industrialized world. Summarily, it is imperative that developing economies legitimately deploy protection policies that facilitate establishment of homegrown industries if balance of payment and economic growth are to be realized. References Cole, M.A. (2000). Trade liberalization: Economic growth and environment. London, UK: Edward Elgar Publishing. Francois, J.F., Shiells, C.R., & United States International Trade Commission. (1993). The dynamic effects of trade liberalization: A survey. New York, NY: United States International Trade Commission. Frieden, J.A.,& Lake, D.A. (2000). International political economy: Perspectives on global power and wealth. London, UK: Routledge. Read More