Question

1. How does protectionism defined? 2. What is the history of the protectionism? 3. What do the pieces imply about protectionism today? 4. What do the pieces imply about the future of protectionism? 5. What has been and what would be the impact of protectionism in the World?

Answer 1

Ans 1. Protectionism:- It is an economic policy that is employed by the government of a nation to restrict imports from other nations. This is mainly done to protect the domestic industries of a country against international trade and uncertain probabilities of the global market. The policy use techniques like increasing the tariff on imports, setting import quotas, and other such more regulations.

Ans 2. The protectionism policy goes as far back to the 17th century when the European countries were in favor of this policy. Although this does not mean that this policy came to existence only then. The kingdom tried to protect their lands by using it against foreign kingdoms in times of war and economic depression or recession, although the economic theories weren't as developed as they are now.

If we talk about the European nations, in the 17th and 18th centuries, they employed protectionism to build their trade and domestic industries at the expense of the other foreign nations. These policies were called mercantilism.

However, in the first half of the 19th century, this policy was being removed slowly after they achieved their goal of strengthening their industries and gaining the lead in Europe. However, other nations like German, France still kept up with it up to some period before lowering them.

Though the circumstances changed when World War I or the Great Depression assaulted the countries, affecting their overall economy and creating other issues.

If we talk about the United States, they also greatly utilized this policy and their average import tariff rates even went up by 20 percent, that was one of the highest it has ever been. This was when the USA signed the Smoot-Hawley Tariff Act, 1930.

Ans 3. No nation can easily become self-sufficient. Maybe they can hold off for some period but not for a longer period of time. That will just create a catastrophe for their economy.

Through the pieces that we have found, in today's world employing Protectionism to the extreme will not be good for any nation. With the economies now grown to the global level, protectionism will result in the trade wars and the stability of the global economy will suffer.

Ans 4. This policy is only for certain circumstances and its disadvantages are more than the Free Trade in the long run. So considering the present issues revolving around the trade and the global economy does not necessarily signify that the protectionism policy will be ruling the future.

Although such situations can change anytime. What if war breaks out or economy depression strikes again, such uncertainties can always change on how the nation decides to use the protectionism on imports.

Ans 5. The impact of protectionism

Taking past and present issues into account, we can see how this policy has impacted the nations in many different ways.

By restricting the imports, the economic growth and the economic stability of nations gets severely affected. The brunt at the end is born by the consumers or the producers. This situation leads to the high inflation rate in the economy which then increases the general price level of the goods. It can also lead to the Great depression.

The global supply chain gets disrupted and makes many other related things difficult. It can lead to trade wars between nations which then can lead to real wars if things get extreme.

Although, if a nation wants to develop and protect their domestic industries for some time then it is also a useful tool.