Taking Sides Analysis: Are Protectionist Policies Beneficial to Business?

Chang (2007) argued that most of the current developed nations enjoying economic stability attain such a state by protecting their infant industries and controlling their foreign investment dimensions. The article that was published in the Prospect Magazine described the scenario regarding the importation of the Toyopet into the United States automotive market by the Japanese company called Toyota. Chang (2007) described how the deal, despite receiving the support from the government for more than a decade, still saw the importation of the poor quality family care brand that led to the termination of the partnership. Therefore, the article presented some reasons to support why the protectionism in international trade is essential to the success, growth, and sustainability of the local businesses. Chang (2007) pointed out that there exist two distinct categories of the countries: the olive-tree and the Lexus whereby the formulation and implementation of the golden straightjacket economic policies to generate a shift from the olive-tree to the Lexus level. According to Chang (2007), the golden straightjacket is not different from the neoliberalism orthodoxy, which continuously promulgates the exhilarating effect of globalization through free trade and deregulated foreign investment. Therefore, the article presented the reason behind the success of economies such as the United Kingdom, Germany, France, and the United States. Chang (2007) argues that the protection of the local industries through measures such as restricted importation, protective tariffs, liberalization of the industrial input importation, subsidies, banned imports, quotas, and patented innovations are central to the growth of local businesses to competitive levels. Chang (2007) also noted that the current economic giants could be championing for free trade and liberalization of marketplaces, but they initially used restrictions to achieve their current financial stability of the local businesses.

In 2008, Robert Krol presented the findings and postulates relating to his perception and analysis regarding trade and protectionism in the U.S. economy, which were contrary to the sentiment of Chang in his 2007 article. Krols work was a comprehensive analysis regarding the centricity of liberalized marketplaces based on the occurrences in the United States. The analysis looked at employment, job value, and income performance as factors of free trade. According to Krol (2008), trade expansion is an essential component of the economic success and sustainability both the United States and their respective business partners. The survey that focused on the assessment of the costs associated with trade restrictions also examined the impact of trade expansion on employment and wages in line with the need for economic growth and stability. The paper found out that the two-thirds of the income growth emanated from the global trade where one-quarter originated from liberalized trades. Through expanded trade, countries can attain a 1% gain in their per capita income, which is central to national income growth. Krol (2008) also pointed out that the level of competition emanating from trade liberalization generate price wars that lead to product variety and lower prices, a factor that contributed to the market advantage that the U.S. is currently enjoying. The paper further presented the fact that internationalized trade only affects 15% of the job opportunities and most displacements occur in sectors that are not inclined towards global competition. According to the findings of Krol (2008), the experienced decline in unskilled wages is attributed to technology rather that liberalized trade. Furthermore, establishing trade barriers enhances the cost of sustaining production whereby in the U.S., the value of the saved job in industries that are protected exceeds the cost of the wages for the same jobs.

Worth pointing out is that the views and critical analysis of Chang (2007) while supporting protection of the local businesses, were essential in presenting the historical picture of the economic journeys that characterizes the developed countries. One of the strengths depicted in this article is how the interrelation between protectionism and the onset of the economic resiliency was historically duplicated across different nations whose national income and GDP are currently considered competitive. Moreover, the other strength that is apparent in the paper is the fact that protectionist approach to local business protection is not restricted to importation but also the nature of foreign direct investment amounts of significant implication to domestic industries. Nevertheless, several weaknesses are evident in the paper. Chang (2007) presented some conflicting arguments. While the author supported protectionism, he also pointed out how the strategy could lead to the stagnation of the local industries where he likened this to a child who gnaws for support from his parents even after they have grown. Furthermore, the article did point to a period where countries embracing restricted trade liberalized some sectors, for example, the U.S. as well as countries such as Netherlands and Switzerland, which did not rely entirely on tariffs yet attained competitive industrialization standards.

On the other hand, Krol (2008) carried out a comprehensive analysis regarding the centricity of liberalized marketplaces based on the scenario in the United States as a case study. One of the strengths depicted in the paper is the presentation of the fact that significant job displacements occur in industries that do not engage in global interactions. Such a postulate shadows the famous argument by those who occasionally oppose free trade. Moreover, the paper also depicted another strength where the author clear articulated the reasons behind the declining unskilled wage as a factor of technology adoption rather that liberalized trade engagements. Nevertheless, several weaknesses are evident in Krols evaluations. The author did not point out how free markets cannot be adopted entirely. Moreover, while free trade is noted to be increasing the product variety in the market, Krol (2008) did not address the quality implication directions and the volatile costs that the government will have to shield to protect consumers.

Based on the two authors it is evident that protectionist policies adopted in different economies have positive and negative implications. While restricting trade limits the capacity of a country to benefit from the effect of direct foreign investment, liberalized marketplaces are associated with the collapse of the local industries and skewed competition. Based on the evidence and discussions presented above, I agree with Chang (2007) that trade restrictions are essential when seeking to support the infant industries and businesses. The strategy allows the local firms to strengthen their production and internal capacities as they advance. Setting restriction in international trade also generates an environment where the country can enhance the development of public corporations, which increases the government revenue. Engaging in free trade affects the marketplaces since a nation could be a subject of industrial dumping, overexploitation, and skewed competition especially when the countries involved are at different levels of economic growth. Furthermore, wealth transfer is a dimension that affects free trade engagement to the disadvantage of the less competitive country.

References

Chang, H. (2007). Protecting the Global Poor. Prospect Magazine. Available at: https://www.prospectmagazine.co.uk/magazine/ha-joon-chang-global-poor-free-trade

Krol, R. (2008). Trade, Protectionism, and the U.S. Economy: Examining the Evidence. The Cato Institute. Available at: https://www.cato.org/publications/trade-briefing-paper/trade-protectionism-us-economy-examining-evidence