The Problem of Protectionism and the Solutions

Topics: International trade, Tariff, Free trade Pages: 2 (395 words) Published: April 25, 2011
In the past few years, the world has witnessed the boom of many developing countries, especially China. The comparative cost principle does prove to us that international trade will benefit any country participated in, and will in turn benefit the whole world. However, every nation still imposes tariffs and other barriers to restrict such trade.

The causes of trade barriers base on either economic or political reasons. A country has to protect some domestic industries and therefore they must impose either tariffs or non-tariff barriers on imports. Those industries can be strategic or infant ones, either of which can cause major problems to the development of the country if they are hurt by foreign industries. If there is a dumping issue – the selling of goods abroad at below cost price – or restrictions on import imposed by the partner country, a country might have to use anti-dumping and other methods to retaliate against such actions. The situation can get even worse if there is a political issue between the two countries; trade might get cut off, an embargo might be enforced and both countries will not benefit anything at all.

The problems such protectionism would bring to both developed and developing nations can be quite obvious. Restricting free trade will reduce the chances and opportunities for businesses as well as consumers all over the world. A country that is enforced an embargo suffer from a lot of disadvantages and can rarely make use of its comparative advantages, leading to serious problems with its economy and society. People in a country that imposes trade barriers do not actually benefit from them, however, as they do not have access to cheaper and possibly better products. This might not be true for developing countries, though, because the domestic markets are considered fertile to them and they can still grow better with less free trade.

As of now, there have been many activities and discussions held by GATT to reduce protectionism...
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