Thesis Statement: While presented as intended to secure domestic firms and industries against competition, protectionism has a damaging impact on an economy in the long run and reverses the progress that the globe has made in promoting free international trade.
Background: Recently, the Trump administration imposed tariffs of a range of imports. While the tariffs targeted commodities from various countries, they were particularly directed at Chinese imports (Partington, 2019). In response to the tariffs, the Chinese government announced that it would also impose higher tariffs on billions of commodities from the United States. In essence, the imposition of the tariffs triggered a trade war. Markets responded to the trade war with poor performance that has left many worried. The conflict pitting the US against the Chinese economy has no victors. Instead, it has created instability and triggered panic.
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Significance: The significance of the proposed research cannot be overstated. Upon its completion, the research will shed light on the adverse impacts of trade protectionism. Additionally, it is hoped that the proposed study will play a vital role in informing the trade policies that nations adopt. By underscoring the devastation that can result when nations pursue trade protectionist programs and policies, the study aims to encourage nation to fully support and passionately defend free and open trade. While the study is relevant to all nations, the insights that it reveals are particularly useful for the US and China which are currently involved in a vicious and highly destructive trade war.
Protectionism stifles innovation
With no competitors, firms have no incentive to innovate. Basically, trade protectionism lulls companies into a state of comfort and complacency.
Protectionism hampers the transfer of knowledge and technology. As a result, it is difficult for companies to gain access to the technologies and insights that they need to innovate.
Trade protectionism limits the options available to consumers. Consequently, consumers are unable to push firms to innovate and are instead forced to settle for pricey and low quality products available in the domestic market.
Slow economic growth may result from protectionist measures
Protectionism reduces the level of trade among countries, thereby robbing nations of vital foreign exchange which is needed to run the economy.
By killing industries, protectionism hampers economic growth. It leaves thousands unemployed by forcing industries to cease operations.
Protectionism hurts various vulnerable sectors of the economy
Industries reliant on external markets see demand for products fall sharply
Firms in the industries forced to pay higher fees on their products. This lowers the appeal of the products.
Protectionism hurts consumers
Consumers bear the brunt of trade protectionism. They are forced to pay high prices for substandard products available in the domestic market.
Trade protectionism severely limits the range of products available to consumers. By imposing higher tariffs on imports, countries essentially lock out commodities of higher quality that are usually available at lower prices.
With little competition, domestic firms have no reason to innovate. Consumers are also exposed to the risk of questionable business practices.
Counter-argument: Protectionism is necessary to save struggling and vulnerable industries and as a retaliatory tool against the unfair trade practices of other countries.
Trade protectionism is needed to secure industries that would be unable to withstand the competitive pressure imposed by imports
ii. A nation may need to resort to trade protectionism in response to similar action by other countries. In essence, trade protectionism may help to level the global trade playing field.
Conclusion: Trade protectionism is a threat to free trade and the health of the global economy. The US should lead the world in promoting free trade.
References
Partington, R. (2019). US-China trade war and the interest rate rise spell losses for the super-rich. The Guardian. Retrieved July 9, 2019 from https://www.theguardian.com/news/2019/jul/09/us-china-trade-war-and-interest-rate-rises-spell-losses-for-the-super-rich
