Reasons Industries Should Be Protected from International Trade in Some Countries - Essay Example

Reasons Industries should be protected from international Trade in Some Countries Student’s Name Institutional Affiliation Introduction In the wake of the globalized world, there has been a contentious debate on the advantages and disadvantages it came along with (Schirm, 2007). One thing that globalization opened was international trade. International trade has a plethora of advantages such as efficient utilization of resources and creation of some sense of equality on commodity among other benefits. If there is one thing that proponents of globalization and the wider business community agrees on, it is the need and impacts that international trade has come with (Schirm, 2007). Amidst the whole debate, even the international trade itself needs some control that are effected through policies at both national and international level. In this paper, the need for protection of some industries in conducting international trade is explored and an example of such an industry and the respective country further used to drive the points home. Industrial protectionism is real and is being effected in most countries all over the world; the developed and the underdeveloped alike (Schirm, 2007). Some of the factors explores include protection of infant industries, national security, protection of consumers, cultural preservation, and protection from unethical practices in the country in question. There are various methods of such protection which are beyond the scope of this paper. Protection of the Domestic Industries Most international trade literatures have made reference to the protection of domestic industry as one of the key factors why some industries are limited from trading with some countries. Globalization not only reshaped the dimensions of international trade but also reduced the levels of development according to countries (Melitz, 2005). Globalization therefore, led to the birth of the concept of developed, developing and the less developed nations worldwide. With reference to protection of domestic industries two types become a subject; the infant industries and the sunset or mature and declining industries (Melitz, 2005). An infant or a sunrise industry refers to an industry that are slowly beginning to gain an edge in the market and is engaging the use of new technology (Melitz, 2005). On the other hand, sunrise industries are the industries that though important have to be faced out to pave way for new industries that are in tandem with the levels of technological advancement and the demands of the consumers (Melitz, 2005). One of the core arguments posited by proponents of protectionism is that when such infant industries are protected from the effects of international industries they get time to grow, expand and mature enough to compete with other strong industries in the global markets (Bagwell, Bermann & Mavroidis, 2010). This has been the case with the most fundamental industries with ability to foster future growth such as telecommunication and computers. This mostly happens in the less developed nations to sheer of any competition from the already mature industries in the developed nations (FOUDA, 2012). The sunset or declining industries such as hip building industries are also protected to prevent loss of economic growth in some countries that are heavily dependent on such industries (McDonald, 2015). The governments impose high tariffs that bar foreign industries from trading with their respective nations as a move to foster learning and thus improvement of technological development as well as economic growth (Narlikar, Daunton & Stern, 2012). Governments also protect such industries because of the relatively high costs that are associated with their development compared to already develop international industries (Bagwell, Bermann & Mavroidis, 2010). Therefore, protection of such industries through imposing high tariffs for a given period of time allows room for such industries to have return on investments, develop and become stable enough to compete favourably with the mature industries (Bao & Qiu, 2012). To some extent this is a form of protecting unfair competition within the industry (Wacziarg & Welch, 2007). In this way, the industries are able to attract investors who will be assured of protection and return on investments as time proceeds. National Security There are crucial industries that are more beneficial to a country and are therefore sensitive from an economical point of view (Bagwell, Bermann & Mavroidis, 2010). Proponents of protectionism argue that such industries warrant some protection by the government for national security purposes. This means that such industries cannot be left to be under the control of foreign industries with international trade capabilities as that will put the national security at stake (Narlikar, Daunton & Stern, 2012). There are however some instances when the only option left is to breach the argument of national security especially when the issues of comparative advantage catch up with the industry (Bao & Qiu, 2012). A good example of such industries that have had to trade as it is the only option is the oil industry in the United States of America where the strategic resource is not able to meet demands of the country whose economy depends on it as well (Waugh, 2010). In this case, the USA has to trade in with other foreign industries in order to be able to drive the economy (FOUDA, 2012; Ma & Lu, 2011). Such industries that are regarded as strategic to a country also need some protection so that their sufficiency and sustainability is maintained (Wacziarg & Welch, 2007). Such industries include energy, armaments, agricultural and food, steel and water industries (Bao & Qiu, 2012). Still on national security some industries are also protected in order to prevent the depletion of natural resources such as oil (Ma & Lu, 2011). Such resources are considered useful and critical to a country and must be protected. An example of such an industry that is protected is the oil industry in the Middle East countries such as Qatar that are protected through imposing high quotas to conserve the resources. Other Reasons for Protectionism There are other general reasons as to why industries are protected. First off, some industries have the capacity to cause environmental degradation through emissions of wastes and greenhouse gases. In this case governments takes measures to cut down the effects of such industries in their nations (Kellenberg, 2009; FOUDA, 2012). Secondly, the industries are barred from trading with other countries being that the goods breach the consumers’ protection rights and are therefore regarded as unsafe for consumers in that particular nation (Cheong, Kwak & Tang, 2014). This means that the protectionism of this form is meant to assure the consumers of their safety and fair prices (Maclean & Volpi, 2000). A good example of such was the ban of the European Union on beef as well as dairy products from the United States of America for fear that the hormones injected in their stock could have a consequent health effect on the EU consumers (Maclean & Volpi, 2000). This has also been a reason why some nations restrict the import of cars that fail to pass the standards that are set for such calibre of imports (Cheong, Kwak & Tang, 2014). The industries are also barred from trading within some countries or economic regions owing to the fact that they are considered as industries that dump the products in the market (Narlikar, Daunton & Stern, 2012). This anti-dumping move have mostly been used by the less developed countries that have long been used by the developed nations as dumping sites for substandard goods (Ma & Lu, 2011). Even the developed nations have at one point in time experienced dumping leading to strict policies and regulations to control such. For example, the USA has a strict regulation and laws that make dumping illegal in the country (Wacziarg & Welch, 2007). A good example is the US steel industry in the US that was protected through imposing high tariffs on steel imports from other countries that were rendered substandard (Ma & Lu, 2011). The other reason yet why industries are protected is the fact that some industries are associated with unethical practices in their domestic countries (Wacziarg & Welch, 2007). Such practices include the issue of poor working conditions, child labour and meagre wages that violate human rights (McDonald, 2015). The other reason why some industries are protected from trading in some countries is so as to preserve the national culture of the country in question from the effects of cultural distortion that might be effected by the products of the foreign countries (McDonald, 2015). Canada for instance have policies and regulations that restrict publications, text-books and magazines from the US as a measure of cultural protectionism so as to preserve the Canadians from the effects of cultural imperialism that has engulfed a lot of cultures across the globe (McDonald, 2015; Waugh, 2010). Conclusion This paper explores at the reasons why some industries should be protected from international trade with some countries. There are a number of reasons as elucidates above. In a nutshell, most governments use quotas, tariffs and other methods that are not the scope of this paper, to confer this level of protection on foreign industries. One of the core reasons as have been seen is the protection of the infant as well as the mature-declining industries. The other reason looked at in-depth is the argument that such protectionism is done on account of national security giving an example of the steel, oil and armament industries. The other reasons that make countries level some protectionism on some industries include to reduce environmental degradation, dumping, unfair or unethical practices and preserve their national cultures. Additionally, countries also do so in a bid to protect their consumers from substandard goods as well as ensure fair competition within the domestic market. It all trickles back to the protection of national economy as all these factors are in one way or another connected to the economy of a country in question. References Bagwell, K., Bermann, G., & Mavroidis, P. (2010). Law and economics of contingent protection in international trade. Cambridge [UK]: Cambridge University Press. Bao, X., & Qiu, L. (2012). How Do Technical Barriers to Trade Influence Trade? Review of International Economics, 20(4), 691-706. http://dx.doi.org/10.1111/j.1467- 9396.2012.01047.x Cheong, J., Kwak, D., & Tang, K. (2014). Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion? Review of International Economics, 23(2), 221-238. http://dx.doi.org/10.1111/roie.12162 FOUDA, R. (2012). Protectionism & Free Trade: A Country‘s Glory or Doom?. International Journal of Trade, Economics and Finance, 351-355. http://dx.doi.org/10.7763/ijtef.2012.v3.226 Kellenberg, D. (2009). An empirical investigation of the pollution haven effect with strategic environment and trade policy. Journal of International Economics, 78(2), 242-255. http://dx.doi.org/10.1016/j.jinteco.2009.04.004 Ma, J., & Lu, Y. (2011). Free Trade or Protection: A Literature Review on Trade Barriers. RWE, 2(1). http://dx.doi.org/10.5430/rwe.v2n169 Maclean, R., & Volpi, B. (2000). EU trade barrier regulation. Bembridge, Isle of Wight: Palladian Law Pub. McDonald, B. (2015). Finance & Development. Finance & Development | F&D. Retrieved 26 September 2015, from http://www.imf.org/external/pubs/ft/fandd/basics/trade.htm Melitz, M. (2005). When and how should infant industries be protected? 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