Economic Growth and Public Policy of the UK: Does the protectionism help?
The effects of globalization have touched all the aspects of life and business today. One aspect is the trading policies between countries. Since the late nineteenth century, the collision started between domestic and foreign industries, which ask governments for measures that could protect local industries, without discouraging the country’s trade relations. The term ‘Protectionism’ was thus introduced in the language of global trade and economy (Rowley, 2002). Protectionism is an economic policy applied in the trading system, to restrict the quantity of imported items, and to flourish country’s exports. The objective of this is policy is to maintain the competition between foreign and the domestic industries. In most of the countries, free trade is not followed and various tariffs and duty charges are applied on the import goods. These taxes allow the government to generate a fair bit of revenue, without utilizing their resources. Moreover, it also helps in the sustainability of the domestic industries. The prices of the imported goods are kept higher by adding these taxes so that the local customers, looking for cheaper options, have to buy the domestic items. In parallel to this, the protectionism policy allows domestic industries to raise the prices of their products, without raising the quality of their products (Ethier & Fischer, 1987, pp.1-2). Another aspect of protectionism is the allegation of quota in the trading system. Many countries use quota in trade, as an exchange of goods policy. This enforces countries to import some items from the same country, where they wish to export their goods. For an example, countries rich in technology, often lack in hand made and items, which involves more labor work than machinery. Therefore, they import such handmade items like, rugs and handicrafts, in exchange of their hi-tech technology. With this policy, governments ensure that they always have buyers of their export items in other countries, which helps in keeping a balance in their import and export ratio (Bora et al., 2002) In the economic sector, the debate on the implementation of protectionism has a vast history. Government officials, advocating this policy, argues that eradicating protectionism from trade would give rise to job crises, as it would harm the growth of local industries. Contrary to this conventional theory, many researchers of finance and Multinational firms believe that protectionism is the real cause of inflation and economic crises globally (Ahearn, 2009). They argue that the Implementation of free trade, will not only allow domestic industries to expand in the corporate world, it will also help the country to become self-reliant. The European countries, have adopted a balanced policy to expand their business in the global, market, without hurting the industries to lose their grip from the domestic market (Stiglitz & Charlton, 2005). This essay will provide a brief and analytical understanding of both the facets of protectionism, and to what extent this policy is effecting the economic growth of the United Kingdom. Relation between Protectionism and Economic Growth
Trade protection has a very prominent relation with the economic growth of a country. In the reign of globalization, industrial growth and expansion of a country, is closely related to protectionism. In many countries, government enforces protectionism on imports, to ensure economic growth of the country. The industries in their emerging phase, needs the government to implement protection policies on imports, to sustain their existence (Awokuse, 2007). However, many analysts believe that protectionism has more adverse affects on the economy of a country, than its benefits. The major drawback it can bring to the economic growth is the downfall in the foreign trade. Industries which are aiming to expand globally prefer...
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