Despite the continued globalization efforts, the United States increasingly resisted trade liberalization in some sectors. Moreover, the American labor movements view American trade policies as unregulated and disfranchising to the American workers. They link this to the aspect of outsourcing of jobs from the overseas markets. This is not true given the advocacy for complete liberalization of trade in an effort to create new jobs by expanding into foreign markets (Alessi & McMahon, 2012).
Protectionism has played a very crucial role in the U.S. trade policy. The United States uses trade tariffs and quotas to protect the country from the influence of international trade. Under the U.S. trade policy, the major role of protectionism is to expand domestic production among industries that are covered under protectionism policies. Additionally, protectionism plays a major role in regulating the entry of cheaper quality products from foreign markets. It also helps to avoid joblessness created by free mobility of cheap labor into the country.
Trade protectionism has far-reaching economic consequences. Trade restrictions affect the efficient use of domestic resources as compared to free trade (Kroll, 2008). In addition, protectionism also lowers the U.S. net exports. Furthermore, it could also have worse impacts on trade terms from other nations. For instance, relative import prices to export prices can lead to the depreciation of the U.S. dollar. Protectionism may also lower the U.S. net exports thereby reducing demand of products from the U.S. (United States, 1990). From these scenarios, it is evident that trade protection hurts the economy by reducing the quantity of exports and exports (Rego & Siriwardana, 2006).
The consumers are adversely affected by trade protectionism. Consumers may be forced to pay a significant amount for products that would have been sourced cheaply from free trade. This imposes costs to consumers, and this can be three times the gain of workers (Krol, 2008). According to Rego & Siriwardana (2006), protectionism drives resources from productive end-use thereby causing loss of social welfare. Additionally, it lowers the output and employment in downstream industries that would have benefited from the import of cheap inputs from the international market. Workers and large domestic industries are the greatest beneficiaries of trade protectionism (Krol, 2008).
The American Recovery and Reinvestment and Recovery Act and “Buy American” provisions of 2009 are regarded as the worst protectionist trade policies to be adopted by the U.S. (Hufbauer, Kirkegaard, Wong & Woollacott, 2010). These protectionist policies have had far-reaching consequences on the economy including an increase in the debt burden of the federal government. It has also limited the expansion of trade exports to the targeted country such as China and thereby contributing to high unemployment rate.
I agree with Jean on the importance of trade protectionism. Protectionism is critical in protecting vulnerable industries that may be severely affected under free trade terms. Different countries possess substantial comparative advantages to produce certain goods. If a country allows free trade in circumstances that it is comparatively disadvantaged in the production of certain products, the domestic industries producing such commodities are threatened. Free trade will adversely affect such industries through intense competition thereby damaging the industries of that country.
I tend to disagree with Kelly on the argument that protectionism allows new companies to learn how to produce their goods effectively. This is on the basis that protectionism limits production expansion as new companies, which are usually small, only target domestic market. In this context, protections limit competition in an industry. Notably, competition within an industry is a major source of efficiency in production and marketing. At this point, protectionism efficiency benefits new and small companies that would have benefited from the open competition. Additionally, new companies can only be cost efficient if they access cheap input from foreign markets.
Alessi, C., & McMahon, R. (2012). “U.S. Trade Policy”: Council on Foreign Relations. Web.
Hufbauer, C.G., Kirkegaard, F.J., Wong, W.F., & Woollacott, J. (2010). US Protectionist Impulses in the Wake of the Great Recession Report. Web.
Krol, R. (2008). Trade, Protectionism, and the U.S. Economy: Examining the Evidence. Web.
Rego, A.P., & Siriwardana, M. (2006). Trade protection in the rice industry: Implications of tariffs on rice imports in Timor Leste (East Timor). Hyderabad, India: ICFAI University Press.
United States. (1990). How the economic transformations in Europe will affect the United States. Washington, D.C: Congress of the U.S., Congressional Budget Office.