Protectionism or Free Trade for the Unites States?
Schools of Graduate and Professional Programs
February 24, 2012
Protectionism or Free Trade for the United States?
There have been many rumbles for protectionism in America and the arguments made against free trade are claimed to save jobs by keeping foreign goods, reduce trade deficits and give domestic industries in America a chance to recover and prosper. These arguments can be compelling but according to the World Trade Organization (WTO), free trade is essential to the survival of the global economy by sustaining growth and poverty reduction. Free Trade
According to Bhagwati (2002), Free Trade is a policy adopted by a government that does not interfere with exports or prevent imports by applying subsidies or tariffs. Under this policy, prices are subject to supply and demand, and determine resource allocation. Free Trade is trade between nations without any protective customs tariffs, the absence of barriers to international trade. On a global scale, International Trade is the exchange of goods and services between countries which is usually governed by the many trade agreements in place between the countries involved in this trade. Free Trade is also referred to as trade of goods and services without taxes or other trade barrier notably quotas on imports or subsidies for producers. As explained by Anderson & Cavanagh (1997), this trade creates free access to markets and market information without any form of distortion through government-imposed policy or actions. Trading globally gives countries and more people the opportunity to be exposed to goods and services not in their own countries with access to every kind of product, goods and services on the international market. A product sold on the global market is an export, and a product that is bought is an import in international trade. Free Trade results in increase efficiency and encourages the opportunity of foreign direct investment (FDI), which is money invested in foreign companies and other assets (Kim, 2002). The investment derived from free trade in currency and expertise raise employment levels, and lead to growth in gross domestic product. Free Trade also offers company expansion and growth resulting in higher revenues. According to the Tang (1991), the opportunity for specialization and more efficient use of resources is further enhanced with free trade, with maximizing a country’s capacity to produce and acquire goods. The World Trade Organization (WTO) is the international body that is responsible for promoting free trade, by drawing up the rules of international trade. World Trade Organization (WTO)
The World Trade Organization (WTO) was commenced in 1995 to replace the General Agreement on Tariffs and Trade (GATT) of 1948. This organization intends to supervise and liberalize international trade, while dealing with the regulation of trade between countries in the organization. The WTO provides a framework for negotiating and formalizing trade agreements, with a dispute resolution process for enforcing adherence to trade agreements signed by the member governments and usually ratified by their parliaments. The WTO oversees the implementation, administration and operation of covered agreements, and provides a forum for negotiations and for settling disputes. The organization has the duty to review and propagate the national trade policies of its members to ensure the transparency and coherence of trade policies. According to Anderson and Cavanaugh, the WTO rules and oversight applies to 90 percent of all international trade. This organization still remains the biggest proponents of free trade and the goal is to create access to all economies and especially to the poorer nations. The WTO has got 153 members nations and 30 observer governments. Observer nations are required to start negotiations for becoming full members with five years of becoming observers. The Vatican is the...