Free trade, protectionism, trade wars, tariff barrier, protectionist measure, economic growth, consumer protection, unemployment, local know-how, local production
In 2018, the United States increased its tariffs by almost $300 billion on imports, thus causing trade wars with China and Europe. This tariff barrier put in place by the former President of the United States, Donald Trump, is an offensive protectionist measure, that is to say a customs policy aimed at protecting the national economy against foreign competition, and we can therefore see that it did not what to dig the US trade deficit, even reaching its highest level for 10 years at the end of 2018, increasing by 18.8% to reach 621.0 billion dollars (549.46 billion euros). Free trade is often represented as the antagonism of protectionism, it's a system in which trade between states is free, it developed at the end of the Second World War and presented advantages which compensate for the negative points of protectionism, such as the fact that the consumer can buy products that come from elsewhere at a lower price. However, free trade does not only have advantages and can also lead to disadvantages for developed countries. For example, this can cause unfair competition for businesses, relocation, unemployment, etc. We can therefore say that protectionism creates problems that free trade can solve and conversely, free trade creates problems that the protectionism can settle.
[...] This competition that free trade generates, forces companies to innovate in order to do better than their competitors in order to develop. In addition, we can see in document 2 that when there is free trade, there is growth and conversely, for example during the 2008 crisis, international trade collapsed as well as country growth. We can therefore say that free trade is preferable to protectionism. However, protectionism also has beneficial effects that make it possible to compensate for the disadvantages of free trade. First of all, protectionism makes it possible to defend existing jobs and protect emerging activities. [...]
[...] So we can ask ourselves: does free trade is preferable to protectionism? In the first part, we will discuss the advantages provided by free trade to protectionism, then in the second part, we will nevertheless see the positive aspects of protectionism which make it possible to compensate for the misdeeds of free trade. Free trade has several advantages whether for States, for companies or for consumers. Indeed, free trade allows countries to gain in efficiency by specializing, it is "sectoral specialization", that is to say that companies will be equipped differently in terms of production factors, it is the "factor endowment" (HOS). [...]
[...] Is free trade preferable to protectionism? In 2018, the United States increased its tariffs by almost $300 billion on imports, thus causing trade wars with China and Europe. This tariff barrier put in place by the former President of the United States, Donald Trump, is an offensive protectionist measure, that is to say a customs policy aimed at protecting the national economy against foreign competition, and we can therefore see that it did not what to dig the US trade deficit, even reaching its highest level for 10 years at the end of 2018, increasing by 18.8% to reach 621.0 billion dollars (549.46 billion euros). [...]
[...] Protectionism therefore makes it possible to protect the industry from foreign competition, this protection is carried out in different ways: by imposing tariff barriers such as import taxes and customs duties. Or by imposing non-tariff barriers such as quotas, which is the authoritarian setting by a government of the authorized import volume, the State can also demand health or environmental standards for imports, it can stimulate exports or even help companies by subsidizing them. China is a good example, it is an actor of globalization and this while putting in place protectionist measures; for example, it helps exports by devaluing its currency in order to offer cheaper products to other countries, it offers low-interest loans to companies and subsidizes them so that they develop. [...]
[...] China has specialized in the mass production of goods with low added value, while Germany has specialized in the production of goods with high added value. i.e. the automobile. Specialization occurs within the framework of the international division of labor, which is the fact of countries not manufacturing the same products and, therefore, exchanging their products among themselves. Moreover, the Free trade promotes economic growth by promoting competitiveness and innovation. Indeed, the competition between States forces companies to be competitive so that their prices are low enough for the consumer to buy. [...]
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