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If international trade is so good for all countries concerned, why is it that countries do not trade freely? Why do they often protect their economies from imports?
Protecting
ARGUMENTS FOR PROTECTIONISM Protecting an infant (sunrise) industry To avoid the risks of over-specialization
There
are no real arguments against this view. It does not promote protectionism, it simply points out the problems that countries may face if they specialize to a great extent.
Strategic reasons
It
is sometimes argued that certain industries need to be protected in case they are needed at times of war is the selling by a country of large quantities of a commodity, at a price lower than its production cost, in another country
To prevent dumping
Dumping
country might wish to impose safety, health, or environmental standards on goods being imported into its domestic market, in order to ensure that the imports match the standards of domestic products many developing countries, it is difficult to collect taxes and so governments impose import taxes (tariffs) on products in order to raise revenue
TYPES OF PROTECTIONISM
Voluntary exports restraints are agreements between exporting and importing countries in which the exporting country agrees to limit the quantity of exports of a specific good below a certain level. This is usually to avoid the imposition of legal restrictions by the importing country.
TYPES OF PROTECTIONISM ADMINISTRATIVE BARRIERS When goods are being imported, there are usually administrative processes that have to be undertaken. This may be known as red tape. If these processes are lengthy and complicated, then they can act as a restriction to imports.
TYPES OF PROTECTIONISM HEALTH AND SAFETY STANDARDS This is where various restrictions are placed upon the types of goods that can be sold in the domestic market, or on the methods used in the manufacture of certain goods. These regulations will apply to imports and may restrict their entry.
The system helps to promote peace in the world. The more that countries trade freely, the less likely that they are to be in conflict. Disputes are now handled constructively and there is a forum for this to take place. Rules make life easier for everyone. Small countries have an equal say and gain from collective bargaining with larger countries. Freer trade cuts the cost of living for the majority of consumers. Freer trade provides more choice of products and better quality products. Trade raises incomes and stimulates economic growth. The system encourages good government.
The WTO supposedly operates on a consensus basis Many developing countries cannot afford to participate in all negotiations WTOs General Agreement on Trade and Services includes a long list of services that should be privatized Free trade does not make life better for ordinary people Unfairly biased towards the interests of multinational corporations Issues of health, safety at work, and environmental protection are too often ignored