Political Science and International Economics

The Ugly Side of Protectionism in the US

Soumya Rastogi

Royal Roads University

The Ugly Side of Protectionism in the US

Introduction

The modern era has set in with massive changes socially, economically and politically. While there are various eye-catching trends economically, the most interesting one so far has been seeing the US, the world’s largest economy take on a protectionist approach in international trade. Protectionism entails the adoption and implementation of policies, which gives the home industries an unfair advantage at the expense of the foreign competition (Melgar, Baleix & Rossi1, 2013). On paper, protectionism seems a good economic policy for the USA, but, practically, it is unhealthy for its economy.

The Discussion

So far, President Donald Trump has taken a huge step towards the implementation of this approach. Other than withdrawing from the Trans-Pacific Partnership trade pact signed the former head of state President Barack Obama, Trump has also renegotiated or abandoned the NAFTA trade deal with Canada and Mexico. He has also imposed a 35% tax on every imported car as well as slapping China with a 45% tax on its exports to the country.

As a result, the US native producers, workers, and business people have really enjoyed the economic protection from foreign competitors. The infant industries particularly will benefit the most as the shelter will allow them ample time and space to invest in their production amenities and workforces and win the trust of the local customers before the setting international market opens up for foreign competitors. Melgar, Baleix, and Rossil (2013) state that the emergence of the Chinese, Japanese, and South Korean industrialization is partly because they were able to protect their indigenous farms from in their infant stages, allowing them time and space to grow and fortify before going into competition with companies from the West.

According to the notion of the Game Theory, protectionism may be necessary. Since other players like China, South Korea, and Japan are protecting their companies, it is also important that the US also offers its industries the same privilege. For a case in point, Tziamalis (2018) argues that if the European Union is indirectly subsidizing the European Company Airbus, the US government has a strong case to retaliate and consider subsidizing the American airplane manufacturer Boeing as well. If they do not, then European Company Airbus will eventually gain a much greater market share that, in turn, may force Boeing out of the business altogether.

Nevertheless, the reality is that the protectionist approach is “ugly,” “unhealthy,’ and bad for the US economy. Considering the tenets of the Economic Theory, for instance, free trade is much healthier than restricted trade (protectionism). The school of thought holds that free trade makes everything cheaper; hence affordable and also improves the quality of merchandises, thereby directly profiting every person (Tziamalis, 2018). The argument stems from the fact that different states boost different strengths of production, which could be rare resources, technological expertise, cheap workforce, or geography.

The argument goes that when every nation concentrates and specializes what they produce best or cheapest, they produce high standard and or cheap products. The commodities could then be traded between states, thereby leaving every player and consumer satisfied. It is the same principle as when everyone specializes in one career and then trading the products that we require, rather than trying to manufacture everything ourselves.

With the protectionist policy, as a result, it is the US’ economy that will be on the losing end, which will suffer the most as compared to the foreign competitors. For example, if the United States increases its import levies and non-tariff barriers against all nations by, say 20% and the nations also take the same measures against imports from America, the outcome would be significant losses in income and GDP for the US economy (National Institute of Economic and Social Research, 2018). Particularly in times of sluggish economic growth, even trivial drops in GDP are costly to employees, consumers, and companies. In this sense, instead of flourishing the country, protectionism will take it to poverty.

Another reason why the US economy will suffer because of the protectionist approach is that it will lower the standards; hence, quality of goods and services (National Institute of Economic and Social Research, 2018). In business, competition is the ingredient for quality productions. Without it, producers and manufacturers will have no source of pressure to perform at the highest levels of standards. Protectionism will allow the US industries to grow, but when their productions get to the international market, they will struggle to match the quality standard set there.

Given these reasons, I advocate for free trade, the approach, which US’ former president Barack Obama had taken. Free trade can pull any state out of poverty as it can source massive income to a nation from abroad, as well as pushing its businesses towards constant investment, hard work and revolution to grow their international market-share (Tziamalis, 2018). The ideology also applies to industries that do not export, but now require to keep their quality high but their prices low and affordable to beat the inbound competition.

As such, other than the protectionist policy, president Trump should consider reverting to the incumbent free trade. The workers and producers do not require any protection from the international competitors, but to improve their game in the foreign trade so that they can be able to compete effectively and attain their sustainability. Among the ways of achieving this milestone include hiring skilled and experienced workers and investing in technology. It is only by doing this that the US businesses will adapt to the evolving economy.

Conclusion

In conclusion, it is true that protectionism has various advantages. However, it is not safe for the US economy. If America cannot revert to the free trade approach, then its industries will have to improve their performance in the international trade. Only this way, will USA safe its economy from collapsing and adapt to the surfacing economy.

References