Question

Should America encourage free trade with its trading partners or seek a more protectionist approach? Take a stand on this issue. It is not enough to argue BOTH sides of the issue. Support your opinion with good economic reasoning. Who benefits from your approach and who loses? Why?

Answer 1

Free trade agreement are basically a series of agreements/compromises between countries to allow flow of foreign goods between them. Countries remove protectionist restrictions and taxes thus easing the import of cheap foreign goods to their countries.

Protectionism approach means that the government bring trade policies in order to shield their domestic businesses from international competition.

From 1830s till the world war 2 , US followed a protectionist trade policy. During this time, US had the highest industrial tariff in the world.This policy helped local business and boosted US economy.

My stand on this issue:-

• Free trade agreements are usually benefit the developing countries , US must follow the protectionist approach
• Since USA is the most developed nation in the world, it is less likely to benefit from free trade agreements(FTAs) .Here are some of the reasons

1. When the north American free trade agreement (NAFTA)was established between US, Canada and Mexico in 1994, which lowered taxes on imports and exports between these countries. This made it cheaper to import food from Mexico than it to grow in US. This let to considerably cheaper goods, a net benefit for consumers, but this also led to almost 1 Million job losses in the agricultural sector in the past 2 decades
2. The outsourcing of jobs from America to Asian countries like China which makes US economy inter-woven and inter-dependent on these countries.
3. These Asian countries could adapt unfair monetary policies to promote their products
4. FTA eventually eliminates US private Companies from the Market, which leads to monopoly of foreign Companies.
5. Economic dependence on Communist countries like CHINA , with whom US does not always agree with, poses SECURITY challenges

Advantages of protectionism:-

Protectionism helps local businesses providing jobs and boosting Economy , reducing dependence on foreign countries for local needs and more self -reliant

However this brings challenges too ,

• As the domestic market saturates, companies need international market to export their goods for growth
• Protectionist lowers the innovation due to lack of competition

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