chapter 2.docx - MGCR 382 International Business Chapter 2...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
MGCR 382- International Business Chapter 2 – Trade Policy Notes Protectionism: a situation in which the government decides to intervene in international trade by regulating the flow of goods and services across borders. o Similar to free trade, implementing protectionist policies create winners and losers. As such, they spark fierce debate amongst the different stakeholders involved; ECONOMIC ARGUMENTS FOR GOVERNMENT INTERVENTION IN TRADE 1) Fighting unemployment Based on the assumption that protectionist barriers will cause consumers to switch from imports to domestically-made products, thereby sparking local economic activity and creating jobs; In a situation of free trade, domestic industries might struggle to compete against foreign companies, which may cause several job losses in the domestic economy. As such, protectionist barriers may help protect domestic firms and employment. Several limitations of this argument: o Risk of retaliation from the country whose jobs were lost due to protectionism (depends on the power of the country in the international scene); o Import-handling jobs may be lost (distribution, shipping, customs); o Imposing trade barriers on certain products may put an upward-pressure on the costs of production of certain domestics firms who use these products as inputs in their production; o Imports, to a certain extent, stimulate exports by increasing foreign countries income; Better dealt with fiscal and monetary policies; 2) Infant-industry argument Protectionist barriers are implemented in order to protect a new emerging industry until it becomes competitive enough; Based on the assumption that new industries’ costs of production are too way when they begin operations, but as they grow, the economies of scale they acquire as well as worker productivity increase their competitiveness. Protection necessary until they become able to survive on their own. Limitations of this argument: o Which industry has the greater potential to become competitive internationally? Difficult to target (no simple answer – varies between countries) o Danger that protectionism will be kept even after the industry has grown sufficiently to become competitive;
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
o Costs to other stakeholders: consumers face higher prices and less
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern