Advantages and Disadvantages of Protectionism
Strengths of Protectionism
- One strengh of protectionism is that it keeps the domestic economy flowing. Since there is a decrease in imports, domestic firms have less competion, and so are able to continue.
- The domestic economy also strengthens, because the unimployment rate will be minimal. This is because the domestic firms are able to produce and sell more goods with a lot less difficulty, giving firms less incentive to decrease its cost by decreasing its work force. The people with jobs will keep consuming, allowing a flow of the economy.
- Protectionism allows the green, fledgling firms to function and develop at a decent rate, because these firms are not pressured by the foreign, more expirienced firms. The fresh firms can growuntil they themselves are able to complete in international markets, promising positive aspects for the domestic conomy in the future.
- Protectionism also prevents dumping. This is where foreign, grand economies enter an economy and sell their goods at a price lower than the costs of production. Consequently, the consumers of that specific economy are spending more, than the consumers in the overseas areas.
Weakness of Protectionism
- There are also weaknesses in using the system of protectionism. For example, protectionism can cause a retaqliation reaction from other countries, ruining the relationship of the two nations. This is a major issue right now between the United States and China. U.S. put restricitons on the Chinese tires, so China retaliated by putting up barriers against different U.S. goods, such us their chicken. This hostility decreases the specialization level of the two nations, harming their economy.
- Also, protectionism prevents nations from maximizing their specialization level, using up factors of production moronically inneficiently.