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Key Term: “Protectionism”

Significant debate is taking place in our country and around the world with regard to the effects of globalization and the ever increasing liberal policies supporting the growth of free trade. Striking the right balance between a national open trade policy and restrictive protectionism regulations are at the foundation of these debates. National protectionism policies to support economic national interest have existed for centuries in one form or the other. Understanding how, when, why and to what extent a nation should or should not implement protectionist policy is the question that challenges or leadership year after year.

Explanation of the Key Term

Protectionism, is a means of controlling the regulatory restrictions implemented on an economic area within a country in order to protect that domestic areas industry and jobs from foreign competition. A simple example of this may be a federal guideline that mandates a tariff or tax on tomato’s brought into the United States. If there is a country that can produce and distribute their tomato’s at a price so low that it will negatively impact the tomato production industry here in the United States, it is in our interest to ensure that the price is regulated. Adding this tax to the imported products helps the domestic company continue to compete. Allowing foreign products to be sold in the country at such a significantly lower rate that it negatively effects the domestic industry simply must be avoided. Additional methods used in protectionism include quotas or may take the form of incentives i.e. subsidies or tax cuts for the domestic business. Determining if these policies are in the best interest of the nation and to what extent is what we should question.

Major Article Summary

Lester, S. (2014). A Call for Integration. International Economy, 28(4), 61-63.

Taking this whole concept yet a step further, in the article entitled A Call for Integration, Simon Lester provides the reader with an argument for increased economic integration. This economic integration he proposes is essentially a merging of national economies. Lester argues that integration will promote greater efficiency, growth and development in international trade (Lester, 2014 p.61). This is not only anti-protectionist in nature but goes even further by merging or integrating states, regions or even nations that share common coordinating regulations. Lester maintains that “the problem of protectionism has not been completely solved, but the existing system of disciplines keeps it in check. This has contributed to a long era of growing economies and prosperity. Anti-protectionism can be thought of as the first generation of economic integration” (Lester, 2014 p.61). This statement alone characterizes well which way the author leans.

Lester goes on to argue that we can learn from the intra-state application of these principles conducted in Canada and apply what was learned there at the international level. He argues that policies enacted in 1995 throughout nearly all of Canada with “rules governing barriers to the free movement of persons, goods, services and investment” (Lester, 2014 p.62) have essentially proven that policies of this nature can not only succeed but should likely be broadened wholly. Diverging and conflicting regulations are essentially the red tape that prevent a nation from realizing its true growth potential.

Discussion

There are plenty of arguments and opinions for and opposing protectionism at every turn. Current trends indicate more popularity towards anti-protectionist policies, supporting open trade wherever it can be performed simply as a means of increasing overall opportunity and competition. There are valid points to this position. Anti-protectionist ideology promote the concept of open borders and feel strongly that protectionist policies steer potential international partners away and frustrate existing partners as a result of often unnecessary red tape.

Support for Lester regarding anti-protectionism is reasonable but only to the extent that it does not interfere with serving its self-defined purpose. After all, protectionism should protect the domestic business? Is it not in our interest to protect our own industrial complex? Hence the name, protectionism, right? However, there is merit to limiting the protectionist’s mentality. Like many other areas of government, over-regulation can stifle real growth and productivity. Therefore, to find the right balance, we must provide solutions to protect our national and international interests equally.

Although he mentions that “we are more likely to share values with our neighbors, due to proximity, frequent interaction, common history, and similar cultures, Lester is likely grossly underestimating the cultural divide that exist between nations that would allow us to have a trade system in place quit so liberal. His view here seems a bit naive. We all want to trust that other nations think and value things as we do but that simply is not the case. I would like to leave my home unlocked when I go to work but I do not. As such, is my protectionist mentality preventing me from having a good relationship with me neighbors? Of course not.

References

Enderwick, P. (2011). Understanding the rise of global protectionism. Thunderbird International Business Review, 53(3), 325-336. doi:10.1002/tie.20410

Facchini, G., Olarreaga, M., Silva, P., & Willmann, G. (2010). Substitutability and Protectionism: Latin America's Trade Policy and Imports from China and India. World Bank Economic Review, 24(3), 446-473. doi:10.1093/wber/lhq005

Sally, R. (2009). The World Trading System and Southeast Asia: Emerging Protectionism and Post-Doha. Regional Outlook, 64-67.

Dutta, P. V. (2007). Trade Protection and Industry Wages in. ILR Review, 60(2), 268-286.

Gardels, N. (2007, Winter2007). The Spigot of Global Growth. NPQ: New Perspectives Quarterly. pp. 2-5. doi:10.1111/j.1540-5842.2007.00855.x.

Das, S. S. (2005). Evolution and Political Economy of Trade Protectionism: Antidumping and Safeguard Measures. IIMB Management Review (Indian Institute of Management Bangalore), 17(4), 51-65.