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The Economics of Protectionism

The history of international economic relations is associated with the development of two concepts in the approach of international relations and as a result of it – the two trends in the state of foreign policy. Protectionists consider the necessity of the implementation of the state protection of domestic producers from foreign competitors. Free traders believe that international trade should be developed on the basis of market forces of demand and supply, as a result structure of exports and imports should form the market. The combination of these two approaches in varying proportions in the different periods formed the foreign economic policy. Even today, the politicians of the US are still arguing about it.


In the article “Why America slept on globalisation”, which was published in the “The Post and Courier” magazine, the author is talking about the protectionism of the US economy, which is needed in order to safe the US position in the global market as the highly developed and powerful country. In this paper, the author shows the advantages of the protectionism policy implementation.

Therefore, this policy may cause the list of benefits for the country. The first one is connected with the protection of a high standards of living and wages in the country (protection of the US economy from the influx of cheap labor and the influx of goods produced by cheap labor, which may cause the decrease of the goods quality that are sold in the country). The next is about the preservation of the traditional activities (national crafts and US farming). With the protection policy, the usage of some certain political objectives in their relations to other countries can be achieved by the tariffs and quotas regulation, and with the help of import duties US can achieve better terms of trade and, as a result, an increase of economic gain. The protectionism of national economy would also support the national industry during the period of its recession, form an obvious increase of the rate of employment, decrease the crisis in industries facing economic difficulties, and protect national economy from the global crisis. On the other hand, in the long term, protectionism can drive the economy into the higher decline because it undermines national production by weakening competition from the world market. As a result, it brings the reduction of consumer welfare because introduction of protectionist measures cause the growth in commodity prices. Therefore, in the long term conditions, protectionism policy decreases the competitiveness of national economy and threatens stability and security of the world market.

On the other hand, the author of the “Financial crisis: Seeds of ‘dystopian future'”, an article that was published simultaneously with the previous one, argues that the USA has to be more open for the globalisation and free trade policy in order to receive more benefits. Free trade can improve the welfare of trading nations as a result of international specialization of production and exchange based on the principle of comparative advantage. This policy also contributes to the quality of products as a result of the growth of international competition. It also helps to optimize the allocation of productive resources and facilitate international concentration of production and mass production of goods. One of the disadvantages of free trade policy development for the developed countries is the increase of the unemployment rate, but this can be easily overcome by the government concentration on the new technologies development and education improvement.

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The free trade concept sounds stronger than the protectionist one. This is because the protectionism in the long term causes certain conditions, which cannot be changed quickly, and take all country into the deep depression. The weakest point of the free trade concept usage for the US is connected to the increase of the unemployment rate. This problem can be overcome with the development of the national priorities on the technology development and education increase. Technology development is the most promising industry that would give for the country both money and power. Free trade would help US to develop its product and to be highly competitive country as it is today. Therefore, the free trade policy is more beneficial for America’s development.


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