Controversy: Protectionism & Free Trade

Protectionism And Free Trade

For the last half-century, many economists have been fighting for the free trade regulation whether should or shouldn’t it to be applied in real world. In late June 2011, the Obama administration announced that three free trade agreements, with south Korea, Colombia and Panama, are fully negotiated and ready to send to Congress for review and passage. These three pacts are expected to generate $12 billion in new, annual U.S. sales. If this discourse can be reached, a common sense of a country shall reconsider to apply a full free trade regulation, not just bilateral or multilateral but the entire countries all over the world. Controversies were unbearable to compare is it better to apply free trade or protectionism trade. These arguments leave us with many possible outcomes. Before one country considers applying one of the regulations, one shall see the advantages and disadvantages of the two regulations.

Free Trade regulation indeed can increase the economic global development by permitting it permits the market to most efficiently price goods and services on the largest possible scale.The 18th century Adam Smith was to agree with free trade view. Then again, it’s called The Wealth of Nations not the wealth of individual nation. For the last half century Smith’s view has dominated, because most economists argue that restrictions on trade between nations hobble their economies. Recent today, ASEAN, EU, NAFTA are the norm, while global organizations such as WTO and IMF urge countries to reduce tariffs and other trade barriers to allow foreign firms and goods to enter their domestic markets. The decreased costs of producing goods and providing services will cause more profitable outcomes. Advanced technology distribution, which supports more production results (quality and quantity), can be added up to the profit list. Free trade also gives one country to apply David Ricardo’s Comparative Advantage theory and be more efficient and effective to produce certain commodities, which become their specialties. Furthermore, political scientists say free trade improves national security by making nations so economically interdependent that armed conflict becomes an increasingly remote possibility.

On the other side, Gerald de Malynes (1586-1641), an English expert on foreign exchange, believed that the outflow of gold (money) should be restricted. The arguments over free trade dates back to the mercantilist era, which believed that the world drew from a “Limited pot”, so the wealth of each nation depended on ensuring a favorable “Balance of Trade”, in which the more gold into the nation must be more than the flow of gold that go out. If an excess of gold flows out, the nation’s prosperity declines, wages fall and jobs are lost. More over, opponents of free trade argue that the economic benefits of trade are outweighed by the invisible costs, which can cause less profitable. The invalidation of protective trade barriers can also affect young industries from blooming in developing economies and prevent more industries to get the chances to grow. Domestic country has more duty to foster a dependency on foreign businesses and potentially undermining the competitiveness of local firms, which can cause the import flow is higher than the export flow.

In conclusion, free trade is a significant res. Experts provide arguments based on their experience for the last half century. Some of Economists tend to only see their given credence theory instead of verify the universalities of their own theory. One shall maintain the balance of trade of the countries that are involved in free trade agreements. The mercantilist theorist, Englishman Thomas Mun, insisted that what matters is not the fact that what matters is not the fact that payments are made inside or abroad, but how trade and payments finally balance out. Mun wanted to boost exports and cut imports. However, he saw no problem in spending gold (money) abroad but as long as the import goods are used to increase the export goods in even larger sum. Both regulations correspond country the most depend on their capability to face global trade. Strong domestic global trade factors prevent imbalance of international global trade, which can apply free trade to increase their domestic income. Otherwise, protectionism trade correspond the developing countries until they are ready to go global free trade. Then again, protectionism is made to protect domestic from the ferocious competition out there.