International Economics

International Economics - International Economics Chapter 6...

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International Economics 10/21/10 Chapter 6 Part 2 Pros and Cons of protectionism Protectionism is shielding domestic producers of goods or services- Do this by creating trade barriers and keep out foreign products. Shielding domestic producers from foreign competition. People tend to favor protectionism in times of financial crisis. The biggest beneficiaries of free trade are the consumers. America has 320, million consumers. There are reasons that economist accept protectionism. The National Security argument, Infant Industry Argument, Terms of Trade Agreement. The Infant Industry Argument When countries have the potential based on resources but not the history on their side. Then exceptions should be made to their history. European countries rape, plunder destroy other countries. When they come out of colonialism, they can no longer compete with colonizers. As a country coming out of this you are not able to fight with countries that are ahead of the game but with age you are able to start fighting in competition. You are protecting newly industry countries to compete among previously far ahead countries. 1865-1950 are clear examples of the way this works around the turn of the century. Protected infant industries are notoriously inefficient at not being able to compete. National Security Argument Because countries have military needs, you have to have industries to supply military strengths. The Terms of Trade Argument Export Prices/Import prices. You protectionism to divide foreigners into lowering there prices. Improve your terms of trade as a result.
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