Protectionism and low wages in developed countries. Since developed

Protectionism
can be viewed as a type of economic policy that restricts/limits trade between
countries through various measures such as tariffs, quotas, subsidies, tax
cuts, exchange rate interventions, legislations and other government
initiatives. The policy is used to make sure that domestic businesses,
producers, workers and jobs are shielded from foreign competition. The policy
is typical for both developed and developing nations. In recent years the more
and more countries have been adopting stances in-line with protectionist
tendencies.

The opponents of protectionist
policies argue that the so called merits of the policy are limited and contestable.
They argue that in the long-run the trade restrictions hurts the people it aims
to help by impeding economic growth and driving up prices. It leads to distortion
in the market and lower levels of efficiency. There are considerable deadweight
losses making a significant dent in consumer and producer surplus.  The negative effect is felt by people of the
country adopting protectionism as well as in the countries being protected
against. Increased protectionist policies lead to an overall decline in the volume
of world trade.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

The advocates of protectionism argue that absence of it leads to
unemployment and low wages in developed countries. Since developed countries
have higher cost of business as compared to low wage countries so in case of
free trade, there is a loss of jobs in the developed nations since they cannot
compete due to their higher labour costs. Their argument essentially boils down
to the fact that out-and-out liberalization of trade (free trade) would result
in large and disparately distributed profit & loss as well as considerable disruption
of labour force engaged in sectors competing internationally.

 

In
general, economists are in consensus that the cost associated with
protectionism far outstrips its advantages and free trade is the way forward. However,
in recent years there has been a rise of protectionist sentiments. With the election
of a conservative president in the US (Donald Trump) there has been a
pronounced shift in US policy that has far reaching consequences for developing
nations. Specific policies such revamping of visa system and pulling out of
trade blocs such as TPP shows that Mr. Trump plans to deliver on his campaign
promise of bringing back American jobs and insulating the US economy. Similar
sentiments are there in UK as well which voted to exit the EU, which was another
heavy blow for free trade.

In this paper we look at what recent
trends in protectionism mean for the countries of South East Asia. These
countries have generally relied on export of goods/services to drive their
economies. Many of them don’t have the domestic markets that can support the
support the level of production making international trade a necessity for
them.

 

We will look at effect these trade
policies have on businesses i.e. what doors have closed which ones are still
open. We will also discuss in detail the possibility of increased regional
co-operation to counter the effects of protectionism in the west.