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Protectioisim and trade - Coggle Diagram
Protectioisim and trade
Protectionism refers to policies instilled by the government to protect the local goods market. This is to improve economic activity, safety and quality.
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Protectionism arguments
For
The dumping of foreign products at artificially low prices is prevented. This allows production in local economies to increase, and new businesses to emerge in the market.
Infant industries are temporarily protected, allowing them to become productive before competing with foreign markets.
Employment is promoted by decreased foreign competition. This lead to the creation of new businesses, as well as an increase in production.
Maintains standards of living because local goods and services are cheap, and increased production is linked to an increased workforce, who will demand higher wages.
Maintains strategic industries, because if foreign companies provide these services, output will be low but prices will be high.
Exchange rates and the balance of payments will be maintained because protectionism will ensure imports do not increase faster than exports.
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Against
High import tariffs and quotas increases production prices, and ultimately prices of goods and services.
When counties see trade restrictions against them, they will retaliate and match those policies.
Inefficient businesses are protected instead of being forced to become efficient, with the help of competition by foreign industries.
Free trade refers to the free exchange of goods and services across international borders, with no interference from governments.
To create a free trade area, member countries sign a trade agreement that prevents the imposition of any restriction policies on trading countries.
Trade countries can produce, consume, and dispose of it's goods and services without government interference.
The World Trade Organization monitors the movement of goods and services between its member countries.
Free trade arguments
For
To increase their efficiency, countries can specialize in the production of goods and services at low prices, and high output. Specialization increases world output.
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Free trade increases the range of goods and services offered to consumers. Consumers will choose foreign goods because of their increased welfare.
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Free trade allows international competition, reducing the prevalence of monopolies.
International trade increases the world's production and increases economic welfare.
With no free trade, consumers and producers both benefit from reduced prices on the cost of products, and the cost of production on products.
With free trade, domestic demand and supply increase, which is filled with cheap imports. Producer surplus then becomes consumer surplus which is an advantage for consumers, but producer surplus decreases because of the low prices of imported products.
Against
Free trade results in depleted resources and climate change because of the exchange of natural resources, and the increased production.
The exploitation of workers and the environment occurs when firms relocate to countries ith cheaper wage rates.
Growth is limited for developing countries because they cannot compete internationally. Businesses in developed countries lose their market share because of new businesses entering the market.
Firms that participate in international markets increase the price of the goods and services, while consumers who can afford the increased prices, purchase those products. This further exacerbates income inequality.