Question

Do you support trade if you are a small local business owner?
Share your thoughts and tell us your interested industry, and how free trade and different trade policies such as tariffs and duties will affect your business?

Answer 1

Case Details

Small Local Business owners, are primarily regarded as those which operate within the political boundaries of a nation and have limited capital wherein, they may produce a good or service or may otherwise sell a good or a service which is already produced for a market.

Therefore, most small business owners which have local operations do not generally favour free trade and competition. This is because multinational companies have the added advantage of having additional capital due to which they are able to produce a good or a service at a much lesser cost than local small business owner ever would. This results in small businesses ending their operations for the lack of customers as well as the fact that they need to share business with other competition all which may run all across the globe.

Free trade refers to a country, removing trade barriers if any and selling product and services without any restrictions on imports as well as getting equal weightage on exports as well in return.

Tariffs, which are taxes and are used to increase the price of imports on the other hand, have time and again been encouraged by small business owners. This is because it provides them with support in terms of the fact that they increase the price of imports and allows them to outsell competition in that case.

For the purpose of answering the question, we have used the following key example for our reference.

Example and explanation: -

Take the simple example of iron and aluminium producers in the United States. They previously were facing stiff competition over the fact that producers in countries such as China and India had the added advantage of being able to produce for a fraction of the cost which they would due to reasons such as cheap labour costs. As a result, they would not be able to match with the costs and were suffering huge damage as local consumption was being fulfilled by foreign imports and the companies would not gain even if they wanted to export their produce as they were not competitive with international prices.

As tariffs were imposed by the United States on Chinese as well as Indian imports which they believed to be a big problem for local small manufacturers, the end result was that the cost of imports increased. This increased the competitiveness of the American small companies which were manufacturing and/or selling these products in the market and it allowed them to gain more demand and saw increased revenue for themselves.

Conclusion

We can conclude by saying that tariffs and trade barriers are generally encouraged by small local manufacturers, primarily in industries where they may not have an advantage in production over international players in the market. It brings competitiveness to their products and services and offers protection to their business against over competition in the market. This is an opinion which they have and may not be correct for industries or economy as a whole as it limits the globalization process and is largely viewed as regressive in nature by economists as it restricts trade.

Please feel free to ask your doubts in the comments section.