Protectionism

[chewyman]

Inspired from a couple of other threads and it really deserves its own.

Is protectionism good, bad or somewhere in between?


My personal view is that it encourages inefficiency and is therefore a complete waste. Small industries in poorer countries would benefit by selling their cheaper produce to richer countries (agriculture to EU and USA for example). Richer countries would benefit from cheaper goods and a larger market.

[alex_white101]

i think your view is correct just a little simplistic, developing countries need to protect certain industries in order to allow them to become large enough in order to compete. developing countries cannot rely on agriculture forever, it is an industry in which employment falls as you become more developed. also agriculture suffers from declining terms of trade.

i would therefore say protectionism is generally bad for the world, but in certain cases it is extremely beneficial.

[chewyman]

Although some countries' economies are primarily based on agriculture I'd largely agree that agriculture shouldn't really be the only industry in a country. But as new wealth floods in through success in the agricultural industry people will leave that and start up new businesses and corporations. The growth of those new industries will be a lot faster this way as opposed to your recommended protectionist policy.

Plus, there's always the argument that if you allow one poor country to have protectionist policies then others will only want the same. It's a slippery slope and we are 'enjoying' the results today.

[alex_white101]

agriculture brings in less and less profits every year due to declining terms of trade. therefore these businesses struggle to suffer. especially as rich markets are blocked by............you guessed it........protectionist policies! i can see what you are saying but i would still side 100% that these small firms NEED protecting for a short while to ever be allowed to grow big enough to compete.

[Guilty_Biscuit]

Felt the need to chip in here with the Pedestrians guide to foreign trade:

Foreign Trade Tips for Consumers, Workers, and Taxpayers

• As a consumer, you're better off with a wider variety of lower priced stuff. Imports are your ticket to happiness. The more imports coming into the country, the better.
  
• If you work in an export industry, that's great. Let's just hope, though, that you're company exports stuff because it's a better producer than other nations and not because government has blessed it with favorable, but inefficient, policies.
  
• If you work for a company that's heavily besieged by better quality, lower priced imports, then keep your career options open. Sure, your industry might get government to restrict imports, but our economy is better off if you get a job in another industry that doesn't need government help to stay afloat.
  
• As a voter and taxpayer, your interests are best served by unrestricted foreign trade. Your tax dollars shouldn't be wasted on government policies that promote an export here or restrict an import there.

[neoni]

My personal view is that it encourages inefficiency and is therefore a complete waste. Small industries in poorer countries would benefit by selling their cheaper produce to richer countries (agriculture to EU and USA for example). Richer countries would benefit from cheaper goods and a larger market.

you know that's the reason people are starving to death while you toss out half your dinner every night, right?

[chewyman]

No, those people are starving to death because of states' protectionist policies that stop poor countries selling their produce cheaply into the market (well among other things but since we're apparently lumping today that'll do).

As for me tossing out half my dinner, that's because I don't like roast red meat.

[Stopper]

Plus, there's always the argument that if you allow one poor country to have protectionist policies then others will only want the same. It's a slippery slope and we are 'enjoying' the results today.

"Enjoying" the results? I don't get the impression that poorer countries are ever allowed to have protectionist policies at all, while the US and Europe quite happily subsidise (yeah - subsidise, even the US) agriculture, steel, coal, the airline industry, and I dare say many other things I don't know about.

I should say that the EU is beginning to abolish CAP, and I know this because it affects my job. I don't know if the US is doing the same, but they certainly should be.

As far as I can see, you can't compare the policies of an African country to a European country. The Europeans/Americans should liberalise completely, and poorer countries should protect their post-agricultural industries, until they can compete.

The 1% (or whatever) loss in annual GDP growth to Europe or America matters less than African countries not being able to grow at all.

[Guiscard]

Plus, there's always the argument that if you allow one poor country to have protectionist policies then others will only want the same. It's a slippery slope and we are 'enjoying' the results today.

"Enjoying" the results? I don't get the impression that poorer countries are ever allowed to have protectionist policies at all, while the US and Europe quite happily subsidise (yeah - subsidise, even the US) agriculture, steel, coal, the airline industry, and I dare say many other things I don't know about.

I should say that the EU is beginning to abolish CAP, and I know this because it affects my job. I don't know if the US is doing the same, but they certainly should be.

As far as I can see, you can't compare the policies of an African country to a European country. The Europeans/Americans should liberalise completely, and poorer countries should protect their post-agricultural industries, until they can compete.

The 1% (or whatever) loss in annual GDP growth to Europe or America matters less than African countries not being able to grow at all.

Saved me having to make that post... cheers.

[spurgistan]

No, those people are starving to death because of states' protectionist policies that stop poor countries selling their produce cheaply into the market (well among other things but since we're apparently lumping today that'll do).

No, people starve AFTER the IMF and WTO convince them to concentrate in cash crops in place of staples, then those products not selling in industrialized countries while our more efficient (i.e. resource-intensive) farming outs their agro workers out of business, or they destroy their land trying to make enough to be able to compete.

[chewyman]

Notice the ' on either side of enjoying? That implies sarcasm for future reference

No, people starve AFTER the IMF and WTO convince them to concentrate in cash crops in place of staples, then those products not selling in industrialized countries while our more efficient (i.e. resource-intensive) farming outs their agro workers out of business, or they destroy their land trying to make enough to be able to compete.

Hey, cash crops have that name for a reason. If people weren't going to make more money from growing them then food stuffs they wouldn't be growing them. The policies of the IMF are harsh, I'll agree, but they work and future generations are better off (if you want to argue about that fine, but it'll deserve a whole new thread). As for richer countries being more efficient that's a common misconception. In terms of hours worked you're right, but that's fairly irrelevant to the capitalist equation. In fact, developing countries are far more efficient price/quantity wise because of lower wages and favourable exchange rates. Again, if wealthy nations were really more efficient they wouldn't need trade barriers because even without them they would win hands down. They need barriers and they couldn't win without them and therefore the argument that poorer countries are more expensive (and thus less efficient) is completely debunked.

[got tonkaed]

As youve stated, there may need to be a new thread about this, but id have to disagree that the whole IMF/ World Bank policies are really that helpful. I think a good case study would have to be Mexico, who really did try to follow the structural adjustment policies and they really have not turned out much better as a result.

I also think the problem is not the attempt to implement cash crops, but the fact that there is such a great degree of overproduction. When you flood the market with the specific crop (which already is at a competitive disadvantage because of subsidizing from larger countries) the value of the crop goes down and you still struggle to provide the necesary food for your population. Furthermore, a cash crop movement is ultimatly only going to put you at a trade deficit because you will be required to to bring in more than the value of that you put out.

The fact of the matter is having these larger companies come into these countries really is not providing a great benefit because of the fact that the workers do not have the support of labor movements, so the companies are always going to be in a competitve advantage. It seems like one of those things that is really good in theory but really struggles in praxis in my opinion.

[chewyman]

Argentina is another great example of the IMF failing. I'm not saying the IMF is perfect and hugely unsustainable growth spurts will always lead to depression (Asian stock market crash for example). I believe that while the basic principals behind the IMF are sound but that there is still a need for moderation.

As for cash crops, that goes back to the IMF policies but in moderation. The market needs to be left alone to achieve an equilibrium between cash crops and food stuffs. It's true that food stuffs will sometimes need to be imported if there is a focus on cash crops (although in countries like Brazil that is not the case) but it will not reach deficit proportions. The reason I say this goes right back to the market's natural desire to reach equilibrium. The only reason this doesn't happen is because governments overly regulate the market.

I agree that there is a disadvantage because of subsidised industry in wealthy nations, that is exactly what I intended to say in this thread.

[Serbia]

My mom uses protectionism all the time when it comes to my little brother. She's always protecting him from me, my Dad, pretty much everyone.