Ecuador relies on petroleum resources substantially (CIA, 2013). Petroleum exports account for more than 50% of its export earnings per year (CIA, 2013). In early 2000, the banking crisis had a large impact on Eduardo’s economy. Ecuador’s GDP shrunk by 5.3% prompting policymakers to adopt the U.S. Dollar as a country’s legal tender (CIA, 2013). This was accompanied by economic structural reforms to stabilize the economy. The immediate results were increased remittances and non-traditional exports. High oil prices also contributed to the growth. The country recorded significant economic growth from 2002 to 2006 recording an average growth of 4.3 percent (CIA, 2013).
In 2008, the economy grew by 6.4% due to high oil prices (CIA, 2013). However, the global financial crisis slowed down Ecuador’s economic growth in 2009. It recorded growth of 3.3%, 8%, and 5% in 2010, 2011, and 2012 respectively (CIA, 2013). This country recorded an inflation rate of 5.1% in 2012 (CIA, 2013). Agriculture, industry, and services sectors accounted for the growth in GDP in 2012. This was above the estimated world inflation rate of 4.5% in 2011 (CIA, 2013). Also, the country recorded an estimated unemployment rate of 4.9% in 2012 as compared to the world estimated rate of 4.2% in December 2012 (CIA, 2013).
Ecuador is relatively attractive to foreign direct investment destination in the industrial, services, and agricultural sectors. This is due to uncertainties in its economic and investment policies. Some laws enacted in Ecuador spur foreign and domestic investment in consumer and industrial goods. However, the country’s legal framework discourages private participation in key economic sectors (U.S. Department of State, 2012).
Protectionist nations introduce import controls such as tariffs, quotas, subsidies, and voluntary export restraints to protect domestic industries from foreign competitors (Heron, 2012). Protectionism in the current global economy is a setback to the progress of international trade that provides significant benefits to all nations. The U.S. has over the years practiced protectionism. In 1807, the U.S. closed over its borders to global trade by imposing a trade embargo (Krol, 2008). As a result, the U.S. GDP declined by approximately 5% in the same year. The most recent protectionist policy that favors imports bans Korean Samsung Smartphones. The Outraged South Korean government blames the U.S. government’s action, limiting competition with Apple Smartphones (Global Times, 2013). However, a country can consider protecting one of its industries to save jobs and employments, eliminate unfair competition, combat dumping, and protect “young” industries (Heron, 2012).
I am totally against protectionism. First, it negatively affects the global economy. Protectionism makes a country’s domestic industry less competitive on the global market compared to others. Protectionism is also costly to a country’s economic growth (Heron, 2012).
World Trade Organization (WTO) deals with trade disputes amongst the member states. The most recent one is the dispute against the United States, filed by China. The dispute was about the U.S’ antidumping policy against Chinese products (WTO, 2013). The Indonesia dispute against Pakistan over anti-dumping and paper product countervailing is also being considered by the WTO. One of the past disputes dealt by the WTO is the anti-dumping measures dispute registered by the U.S. against Mexico, China, Turkey, and the European Communities in 2003 (WTO, 2013).
Though many scholars regard WTO as an effective body in the settlement of trade disputes, I hold a contradictory argument. First, the dispute resolution by the WTO is a long process that provides a less remedy in dispute settlement. Secondly, it takes a long for its resolution to be implemented. Also, the process is prone to political influence.
CIA. (2013). Ecuador. The World Factbook. Web.
Global Times. (2013). S. Korea regrets over US protectionist policy. Web.
Heron, T. (2012). The Global Political Economy of Trade Protectionism and Liberalization. New York. Routledge.
Krol, R. C., & Cato Institute. (2008). Trade, protectionism, and the U.S. economy: Examining the evidence. Washington, D.C: Cato Institute.
U.S. Department of State. (2012). 2012 Investment Climate Statement – Ecuador. Web.
WTO. (2013). Dispute settlement. Web.