Question

What are the advantages and disadvantages of trade protectionism, specifically in the U.S and its effect on the world?

Answer 1

Trade protectionism is the strategy adopted by a country to protect domestic industries from unfair foreign competition . Such measures help infant industries grow in the short run and also help to maintain trade balance but in the long run such policies might prove to be destructive . There are four most important modes of providing trade protectionism , such as : tariff , government subsidy to local industries , import quotas , deliberately lowering the currency value or depreciating .

Advantages : protection to infant industries , time given to industries to build their own competitive advantage , short term job creation for domestic workers because the industries hire locally due to protectionism .

Disadvantages : In the long run industries lose competitive nature and there is lack of incentive to innovate which ultimately leads to fall in quality of output .

Job outsourcing is an outcome of declining U.S. competitiveness in the international trade market . USA has invested very little in education and human labor development . This is particularly true for high-tech, engineering, and science . Increased trade opens new markets for businesses to sell their products. A study by The Peterson Institute for International Economics estimated that ending all trade barriers would increase U.S. income by $500 billion.

If protectionism is increased in US it will lead to fall in rate of economic growth , more unemployment and layoff , people engaged in export industries will lose jobs since when US adopts protectionism other countries will do the same and reduce consumption of US goods .