Question
Discuss, with examples, how international trade protection
may affect consumers and producers in an economy and whether on balance can be
justified. (12) Paper 2 May June 2013
ANS :
Only the benefits of trade protectionism may not be the
first choice for the economy as it has
some serious implications. Trade barriers include tariffs and quotas that
generally push up the prices of goods and services faced by consumers. Thus the
domestic consumers face higher prices and will pay more for lower quality of
products than foreign consumers. It is often the case that the higher prices
due to tariffs hit the lower-income peoples; hence, they may worsen the
inequalities in the distribution of incomes, and allocate the scarce resources
less equitable. Moreover, the protectionism methods interfere in the operation
of the market and allocate the resources inefficiently both locally and globally. In
general, tariffs raise costs for society.
However, the producers may be surplus as they are protected
from cheap importers and can charge comparatively higher prices in domestic
markets without the tariffs. It is not appropriate all the time. Another way import
restrictions discourage domestic firms or industries to take the challenge in foreign
competitions. Besides, the domestic producers get government supports like
subsidies, as a result, they have less incentive to improve their efficiency and
even depend on government subsidies for survival. Also, it creates a danger in the country due to the ‘retaliation
action’ taken by the government to control import only.
The country also uses trade barriers on many economic grounds,
for example, to protect sunrise industries as known as infant industries like
new technologies. This encourages new firms to be more competitive
globally. Protectionism may allow domestic firms to develop comparative
benefits through economies of scale. They may invest more in human capital
development that develops skills,
productivity, and capabilities.
Protectionisms are erected to protect some strategic industries
such as water, steel, food, and energy. For example, the main aim of the EU's Common Agricultural Policy is to
create food security for Europe by protecting its agriculture sector.in another case, non-renewable resources like gas, oil are needed to protect for getting
long term benefits for the economy. The oil-rich Middle East sets quotas on outputs in the short run to conserve resources. And
trade barriers are strongly erected to deter unfair competition to remove the inequality of income distribution. Similarly, the country may protect the
environment from pollution caused by production and transportation.
Thus it is true that the protection method deforms the market
forces and therefore may impose an extra cost on domestic consumers and producers.
However, in certain situations of economic grounds protectionism can be
justified.
M. Anwar Hossain
Senior Teacher ( A & O Level)
call: 01676514507
To know more visit the link:https://www.youtube.com/watch?v=bCQDtu5813Q&t=42s
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