PROTECTION AND FREE TRADE

Yo name is Joe I hail from the ghetto.
Imma talk about protectionism and free trade.
What is Protectionism and Free Trade? Well.....maybe if you were awake in your economic class I wouldn’t have to tell you! Kidding..hehehe....seriously stay awake fool.

• Protectionism – barriers to international trade to protect local production. These barriers include tariffs and non-tariffs barriers
  
• Tariffs- are basically tax on imports.
  
  For example, China starts to export saris to India, therefore local Indian producers are going out of business. India could put a tariff on the import of saris to discourage China from exporting saris to protect their domestic market.
  
• Non-tariffs -are less direct protectionist measures used to reduce the measure of import in the country.
  
  For example,
  *Quotas.(a limit on the number of imports into a country)
  
  *Subsides (are when the government give money to local producers to drop their price so the consumer will buy the local product instead of the imported one)
  
  *VER( Voluntary Exports Restrains), where both countries agree not to send things to each other thus benefiting from it.
  
  *Excessive Standard Requirements, could be health/safety requirements or anything that basically makes it hard to import.

mindmap

There are also arguments on whether there should be barriers or not.

• Arguments FOR Protection say that it will:
• 1. Protect young and infant industries
• 2. Prevent unemployment
• 3. Prevent dumping
• 4. Prevent over-specialization ( too much overproduction of one product)
• 5. Improve Balance of Payments (X-M), increasing exports and decreasing imports

• Arguments AGAINST Protection say that it will:
• 1. Cause other countries to retaliate with the trade barriers (fight back)
• 2. Protect inefficient domestic firms
• 3. Increase the gap between rich and poor countries.
• 4. Result in loss of social welfare.
• 5. Result in more uncompetitve exports

FREE TRADE

Free trade is trade with no tariffs or any type of protectionism. It is basically the opposite of what Protectionism is.

Advantages of Free Trade:

• It lowers the price for good and services- this promotes competition between firms
• Encourages innovation- firms would want to create products that would capture the attention of market shares ( a percentage/portion of sales of a product/service that are controlled by a country)
• Encourages international cooperation- nations will exchange goods freely.

Disadvantages of Free Trade:

• Might hurt domestic producers (citizens would rather buy the goods and services imported into the country)
• Increased competition
• Corporate restructuring