NationStates Jolt Archive

Why do people dislike protectionism? It seems that it would be good in some situations, yet many on these forums opose it, why?
What is a good working definition of the concept?
When was it used?
When did it fail?
Did it ever succeed anywhere?
Why is it bad or good in your opinion?

Don't want to do your own homework? You should at least frame the question in such a way that doesn't make it LOOK like you are begging someone to write a paper for you.

Don't want to do your own homework? You should at least frame the question in such a way that doesn't make it LOOK like you are begging someone to write a paper for you.

I don't want a paper. This isn't homework, I was actually happy when I saw a reply to this thread, only to find it wasn't an answer. I really want to know this, but more than just some wikipedia entry I want NSers opinions because, feelings about protectionism are usually the main objection to Liberal economic policies. I understand social liberalism and want to understand what happens to go wrong when they touch economics.

Now that I've declared my motivations, please leave Liberalism out of this thread, I only want to learn about protectionism.

Why do people dislike protectionism? It seems that it would be good in some situations, yet many on these forums opose it, why?
a) It's nationalism with money.
b) There will always be someone who suffers when there is protectionism...both in the short and the long term.

What is a good working definition of the concept?
Basically any action undertaken to stop or slow free trade into your country. That can include tariffs, quotas, subsidies, unreasonable quarantine or other legal rules and so on.

When was it used?
Through much of history really. There was this thing called "Mercantilism", which is all about exporting more than you import (and for that to work one needed colonies who couldn't sell anything back).
Then during and after the Great Depression, when people started to blame everything on the evil foreigner it became very popular.

So the first globalisation was during the industrial age. That ended when WWI destroyed that world, and now it's coming back.

When did it fail?
Pretty much whenever it was tried. Popular examples are the American car industry, which was slaughtered by the Japanese.

Did it ever succeed anywhere?
Sorta. The Japanese in particular used their particular style of economics to protect local industries, but let them compete quite heavily with each other domestically. Once they were deemed ready to take on the world, the borders were opened and they conquered it.
But for that to work, one needs a lot of special criteria to be true, and no modern country has that at the moment IMHO. Especially not Europe or the US.

Why is it bad or good in your opinion?
Well, simple really:
http://en.wikipedia.org/wiki/Comparative_advantage

Plus, it's no good for the business culture at home, for innovation and flexibility.

First off, thank you.

Regarding:
b) There will always be someone who suffers when there is protectionism...both in the short and the long term.

Isn't this also true under free trade, isn't that just capitalism?

Isn't this also true under free trade, isn't that just capitalism?
No. One may argue that trade liberalisation has a bad effect on some countries in the short term (although real statistical evidence only exists for badly managed liberalisation of capital markets, not goods or services), but in the long term, everyone will be better off, given they have half-decent governance.

That's what Africa's been missing.

prtoectionism was used extensively during the dirty thirty's and the stock market crash. Also, North Korea and Cuba are protectionist governments.

Also, North Korea and Cuba are protectionist governments.
Cuba not so much actually. They try to trade with the world (cigars, rum anyone?), the problem is just that they don't have many major companies because everything is state-owned.

Oh, and the Americans and their silly cold war of course.

North Korea is a good example of protectionism gone wild though.

Even North Korea is learning that protectionism is bad with their opening of South Korea manufacturing centres near the border.

Even North Korea is learning that protectionism is bad with their opening of South Korea manufacturing centres near the border.
Sorta...they've had these "Special Economic Zones" for some time now. Problem is just that
a) the government still controls them tightly, it really just wants to make a buck out of it, and it shows
b) no one wants to trade with North Korea, and they've got little to offer.

Although I have heard that the DPRK leadership is using military submarines to run drugs into the Asian market. So even there trade is considered a good thing. :D

b) There will always be someone who suffers when there is protectionism...both in the short and the long term.The argument for protectionism is that trade benefits are not mutually beneficial. There is always someone who loses out in trade, and it might as well not be you. For instance, the CAP currently puts EU farmers at an advantage and non-EU farmers at an disadvantage, both inside the EU and outside of the EU. If the CAP were to be removed then EU farmers would be at a disadvantage due to higher costs of labour, and farmers from developing countries would be at an advantage due to lower labour costs. Again, protectionism assumes someone will always suffer in trade, and so it might as well not be you.

Protectionism does not always fail. Again, the CAP is a prime example. The EU is self suffcient in food production (one of the major aims of the CAP), whereas countries such as the USA are not.

Protectionist measures also include anti-dumping laws. A measure than can be seem to be very positive in that it stops large companies from dumping excess amounts of of a product onto the market in order to make prices lower and therefore put smaller companies out of business.

Patents and Copyright are also protectionist measures in that provide limited monopolies for companies so that they are able recoup R&D costs and not subject to underhanded competition. Without patents drug research would grind to halt. For it would not be profitable for any company to invest up to $1 billion in researching a drug only for a generic version of the drug to become available on the market in a matter of months. This is one of instances in which Adam Smith was an advocate of Protectionism, though his example was the development of the colonial markets.

I'll reply latter with the faultly assumptions associated with comparitive advantage.

On the whole I prefer free trade, but protectionism has its advantages. I believe African countries would have benefited from early protection from the global market before slowly opening up the, now developed, economy to global market.

Why do people dislike protectionism? It seems that it would be good in some situations, yet many on these forums opose it, why?Because it interferes with the free market, and they believe anything that interferes with the free market is inherently bad.
Did it ever succeed anywhere?Yes, pretty much every country (if not every country) that became industrialized did so behind a thick wall of protectionism.
Why is it bad or good in your opinion?It can be good or bad, it depends on the situation.

There is always someone who loses out in trade, and it might as well not be you.
In your example, the only reason someone loses out because there wasn't trade before, but the unfair propping up of some with government money. Take that away (trade or not), and the farmers will be worse off.

It's in the very definition of trade that both sides are happy to accept the deal because they get something out of it. And as I said, actual real evidence that trade liberalisation has been bad for any given country is close to non-existent.

Protectionism does not always fail. Again, the CAP is a prime example. The EU is self suffcient in food production (one of the major aims of the CAP), whereas countries such as the USA are not.
On aggregate, the world is worse off. Furthermore, the EU taxpayer is worse off. It's playing favourites with the farmers, "self sufficiency" is of absolutely no consequence.
North Korea is "self sufficient" in many areas. I still wouldn't want to enjoy the produce of their economy.

Protectionist measures also include anti-dumping laws. A measure than can be seem to be very positive in that it stops large companies from dumping excess amounts of of a product onto the market in order to make prices lower and therefore put smaller companies out of business.
Whether or not you want to put that as protectionism might be an issue. If the WTO does it, it can generally be regarded as not being against free trade.

Patents and Copyright ... is one of instances in which Adam Smith was an advocate of Protectionism, though his example was the development of the colonial markets.
But that doesn't have anything to do with international trade. While I agree that the system as it currently exists is not very good and will need to be updated, a completely closed economy can have exactly the same problems.

I'll reply latter with the faultly assumptions associated with comparitive advantage.
Feel free, but note that I posted it simply as an introduction because it was easiest to understand. You'd have to disprove a lot of economic theory to make a point ... I suggest you start with the Heckscher-Ohlin Model.

On the whole I prefer free trade, but protectionism has its advantages. I believe African countries would have benefited from early protection from the global market before slowly opening up the, now developed, economy to global market.
They tried that. Unfortunately, they were also suffering from mad dictators, civil wars as well as all sort of "socialist" policies. Plus the interventionism from former colonial powers.

Protectionism makes stuff more expensive for me.

The argument for protectionism is that trade benefits are not mutually beneficial. There is always someone who loses out in trade, and it might as well not be you. For instance, the CAP currently puts EU farmers at an advantage and non-EU farmers at an disadvantage, both inside the EU and outside of the EU. If the CAP were to be removed then EU farmers would be at a disadvantage due to higher costs of labour, and farmers from developing countries would be at an advantage due to lower labour costs. Again, protectionism assumes someone will always suffer in trade, and so it might as well not be you.

Is that necessarily a good thing? Subsidies depress the world market artificially, putting farmers in less developed countries out of business and worsening the situation economically for other nations. In an economy whose exports are as vital as they are in the EU, it seems like bad policy to economically weaken other nations when you depend on them for purchasing exports.

Plus, cheaper food increases purchasing power, which could be spent in other places that are better for the economy and are more sustainable.

Protectionism does not always fail. Again, the CAP is a prime example. The EU is self suffcient in food production (one of the major aims of the CAP), whereas countries such as the USA are not.

Self-sufficency isn't a particularly desirable state, especially when it has considerable negative effects on other nations as well as on the home nation itself.

Protectionist measures also include anti-dumping laws. A measure than can be seem to be very positive in that it stops large companies from dumping excess amounts of of a product onto the market in order to make prices lower and therefore put smaller companies out of business.

There's nothing wrong with dumping in a lot of cases; if someone else can do the job for vastly cheaper and produce the same quality, there is no justifiable reason why they shouldn't be allowed to sell their products. Anti-dumping laws and tariffs hurt the lower classes hardest of all and contribute to income inequality and lower living standards in the long run.

This statement applies only to localized anti-dumping laws and not those applied in an international sense by the WTO.

In your example, the only reason someone loses out because there wasn't trade before, but the unfair propping up of some with government money.Unfair according to whom? The market?

Self-sufficency isn't a particularly desirable state, especially when it has considerable negative effects on other nations as well as on the home nation itself.I don't see how self-sufficiency could be undesirable for a nation, but desirable for an individual.

Unfair according to whom? The market?
Unfair according to me...the Africans get nothing.

I don't see how self-sufficiency could be undesirable for a nation, but desirable for an individual.
It's not desirable for an individual either. Do you want to live completely alone, and produce everything you use yourself?
Talk about a broad range of skills.

Unfair according to me...the Africans get nothing.Well, you're entitled to your opinion. :)

It's not desirable for an individual either. Do you want to live completely alone, and produce everything you use yourself?
Talk about a broad range of skills.That would be the ideal situation, yes, but unfortunately impossible. It is possible for a nation to do so, though, with the exception of natural resources.