Question

International Trade

How would you respond someone who is arguing in favor of greater protection of domestic industries against free international trade? Write a short essay (no longer than 4 pharagraphs) .Justify your arguments with a trade model of your choice. (It can be the Ricardian Model or the Hecksher Ohlin Model) You can also include graphs.

Please explain carefully.

Answer 1

Hi,

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Question:

Answer:

International Trade:

International trade is the exchange of capital, goods, services, technology and knowledge across the international borders or globe. International trade play an important role in the economy globally. Its affect the balance of payment, exchange rate, trade balance, employment, government revenue, business, inflation etc.

Free trade:

International trade is the unrestricted exchange of capital, goods, services, technology and knowledge across the international borders or globe. There are number of regional and international organizations are working in this sector to promote free trade. A free trade agreement is a pact/treaty between two or more nations to reduce barriers to imports and exports among them like APEC, EFTA, NAFTA etc. Free trade enhance and improve economic development, economic productivity and efficiency, increased innovation,R&D. Free trade increases access to higher-quality, lower-priced goods for the domestic and foreign consumers.

Trade Protection:

It is trade strategy by which a government protect the domestic industry through  limit imports or promote exports. Government use different tools to restrict import like, tariff, quota etc and promote export by different trade aggremets and subsidy. The government do it in the favor of own nation because nation first.

Hecksher Ohlin Model:

The Heckscher-Ohlin model is an macroeconomic theory that tells that a countries export what they can most efficiently and plentifully produce.The model emphasizes the export of goods requiring factors of production that a country has in a very large quantity. A country export capital-intensive product and import labor-intensive product but its depends upon the cost of capital and labor.According to this theory the game of export and import is a really a game of specialties or expertise and quantity of natural resources. If a country do not follow this strategy then country could be negatively affected and falling in wide trade deficit.

Now come on the question:

Some people and nation arguing in favor of greater protection of domestic industries against free international trade. But it is not a good international trade philosophy and not more success in this era where countries are promoting and following neo-liberalism philosophy. This world has became flat and market has became free. After the LPG policy and digital revolution globally made the world more dependent. Every country has own specialization,and different resources and skills level. Example OPEC have huge production of Petroleum product, Russia has also the same other side USA, western Europe have specialization in technology and capital goods production. China, India, Philippines, Vietnam has large labor force. so, every country trade with each others and export and import of goods, services, capital, technology and knowledge accordingly to fulfill their demand. But, if a government restrict import then it can lose the benefits of free trade. Free trade enhance and improve economic development, economic productivity and efficiency, increased innovation,R&D. Free trade increases access to higher-quality, lower-priced goods for the domestic and foreign consumers. Other side that country can face the different challenges related to international political and economic treaties with different country also. WTO can also creat problem for this country.

Thank You