The policy of economic protectionist is a policy or a set of policies adopted by states in order to regulate the amounts of imports flowing into the country. These policies often take the form of tariffs (taxes imposed on imported goods), quotas (limits on the amount of a particular good that can be imported), and subsidies (financial support provided by the government to domestic producers). The goal of protectionist measures is to make foreign goods less competitive in the domestic market, thereby allowing domestic producers to maintain or increase their market share. The policy of protectionism may however have unprecedented consequences for diplomacy and international relations as well as for the economy as discussed below.
Advantages of Economic Protectionism
There are many arguments for protectionist measures to be taken. Different scholars and governments adopt varied reasons why such measures are important. In this article, we seek to highlight some of the reasons in support of protectionist economic policies.
For starters, it is argued that protectionist economic policies are important because they first and foremost help to protect a country’s infant industries. It is argued that it is important for states to institute measures that protect local small industries that produce certain goods from being overwhelmed by outside competition through imports. Left to the forces of liberalization, it is argued that infant companies in states may be ran out of business by large multinationals supplying similar goods to a country. This therefore credits the importance of market protectionism in the global economy. An example of such protectionist measures to protect local infant industries was Kenya’s ban on imported sugar in a bid to stimulate and protect the local sugar industries from larger sugar producing industries in other countries such as Uganda.
Another argument that is put forward for protectionist economic policies is that there is a need to protect jobs in a country from being stolen by other countries. Was market liberalization allowed without any restrictions, it is evident that there runs the risk that local industries may be ran out of business as illustrated in the previous point. Was this to happen, then local jobs would be destroyed as there would be no jobs left for people to work on in industries. This therefore makes it important for some level of control of imports to protect local jobs.
Yet another argument for protectionist is that it is important to control dumping of foreign goods in a country. Some countries are notorious for dumping where they sell exports to foreign countries at very abnormal prices, sometimes way below the production cost of such goods. This is a disaster as it kills the local industries in the importing countries as they can not compete with these very low prices. An example of this is china which has sometimes being found guilty of dumping products across the world for prices way below what they were even produced at. This may have devastating effects hence the need to control it.
Protectionist is also regarded as beneficial due to the fact that it is seen as a source of government revenue. By raising taxes and tariffs on certain imports, a country increases the amount of revenue it collects from international trade. Further, with protectionist measures, it becomes more difficult to evade taxing on a specified amount of goods. An example of this in place is the United States where the government was able to raise billions of dollars by imposing heavy tariffs on certain imports from china such as farm produce.
Protectionist measures of economic policies are seen as beneficial since they are at times deemed to prevent labor exploitation and unfair labor practices in the exporting countries especially those that are developing countries which may observe complete disregard of labor laws so as to just basically rump up production. This is seen as a grave violation of basic human rights and a protectionist policy adopted particularly targeting goods produced in inhumane conditions may be a good way to sanction the exporting state to change its way, reform its labor rights and protect the state’s workers.
Adoption of protectionist measures are also some times viewed as necessary interventions to help a developing country diversify her economy. The challenge with many developing countries is that their economies are over specialized whereby they only offer very limited production of goods which is mainly limited to primary industries. Protectionism can therefore be adopted by such states to help it diversify her economy. So how this works out is that by imposing protectionist measures, a developing country can particularly target the protectionist policy to protect an infant industry that is not part of the major more developed industry in the country. This shields the young industries from competition as discussed earlier hence leading to growth of the young industries and hence diversifying a country’s economy.
Protectionist is also defended by the fact that it remains one of the sure ways for a country to contain and probably reverse a chronic balance of payments deficit. When the exports of a country are far much less than the imports of the country, the country if said to be in a balance of payments deficit. This deficit may be harmful to a country in the long-run hence interventions such as a ban of certain imports is necessary to reverse these deficits. Kenya was a huge practitioner of this in the years preceding her market liberalization policies in the 1990s. These policies of protectionism helped the country maintain a fairly good balance of trade.
Finally, protectionist measures are adopted by states in order to make sure that certain products being imported to a country adhere to the country’s level of health and safety standards. This is taken when certain products are needed by the laws of a country to adhere to certain rules of production and packaging. Failure to adhere to these guidelines may lead to a complete ban on the importation of such goods from specific countries.
Disadvantages of Protectionism
There are several disadvantages to protectionist policies:
- Higher Prices for Consumers: Protectionist measures like tariffs and quotas increase the cost of imported goods, which can lead to higher prices for consumers. This can reduce purchasing power and hurt the overall economy.
- Reduced Competition: Protectionist policies reduce the competition that domestic businesses face, which can make them complacent and less efficient. This can lead to lower quality products and reduced innovation.
- Decreased Trade: Protectionist policies can lead to decreased trade between countries, which can harm the global economy. This can also reduce opportunities for growth and development in countries that rely heavily on exports.
- Inefficient Allocation of Resources: Protectionist policies can lead to inefficient allocation of resources as domestic producers are not exposed to the same level of competition. This can result in lower productivity, higher costs, and a reduced standard of living for consumers.
- Retaliation: Protectionist policies can prompt other countries to respond in kind, which can lead to a trade war. This can result in a decrease in trade, higher prices, and reduced economic growth. For example, USA’s move to increase tariffs on Chinese goods under President Trump, led to an all-out trade spat with China with protectionist and counter-protectionist tariffs being imposed. This culminated into what is commonly referred to as the US-China Trade War.
- Political and Diplomatic Tensions: Protectionist policies can also lead to political and diplomatic tensions between countries, as they can be seen as a form of protectionism. This can harm relationships and lead to increased conflict.
Conclusion
In conclusion, protectionism is a set of policies aimed at shielding a country’s domestic industries and businesses from foreign competition. While protectionist measures can have some benefits, such as helping to revive struggling industries and protect jobs, they also come with several disadvantages.
Protectionist policies can lead to higher prices for consumers, reduced competition, decreased trade, inefficient allocation of resources, retaliation, and political and diplomatic tensions. Moreover, protectionist measures can make domestic businesses complacent and less efficient, reduce innovation, and harm the global economy.
It is important to weigh the benefits and drawbacks of protectionism before implementing such policies. While protectionism may offer short-term benefits, it can have negative consequences in the long run. A balanced approach that considers both the needs of domestic businesses and the wider economy is likely to be more effective in promoting sustainable economic growth.