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Protecting Our Own: The Pros and Cons of Economic Protectionism

Updated: May 7, 2023

Carson Linkov, 3rd place winner of the Ontario Writing Workshop

April 1st, 2023

 

Economic protectionism aims to limit international commerce in order to shield native sectors from foreign competition. In recent years, the practise has generated a great deal of discussion and controversy. While some contend that it is essential for economic stability and growth, others assert that it causes inefficiencies and lowers total economic well being.


The mercantilist era of the 16th and 17th centuries, when European countries strove to increase their own economic might by exporting more than they imported, is when protectionism first emerged. This prompted the establishment of regulations like tariffs, which are fees on imported goods, and quotas, which set a country's annual import cap on foreign commodities.


Protectionism proponents contend that domestic sectors must be shielded from unfair competition from foreign firms that might have lower production costs or get government subsidies. They say that protectionist policies can help to create jobs and drive economic growth by giving domestic producers a competitive advantage.


Opponents of protectionism contend that by insulating domestic industries from competition, which might lessen incentives for innovation and productivity increases, protectionism creates inefficiencies. They contend that protectionist policies might damage low-income households and worsen income inequality by driving up consumer prices by restricting access to cheaper imported goods.


Notwithstanding the controversies surrounding it, protectionism is still a well-liked strategy for making policy in many nations. For instance, in an effort to shield domestic companies from international competition, the United States recently slapped tariffs on imported steel and aluminium. Others contend that this action is vital to defend native industries from unfair foreign competition, while others have denounced it as protectionist and potentially destructive to the economy as a whole.


Economists frequently disagree on the effect of protectionism on the overall economy. According to certain studies, protectionist policies can aid in short-term economic growth stimulation by bolstering domestic businesses and generating employment. Yet, other research indicates that protectionism, by limiting competition and diminishing incentives for innovation, might eventually result in inefficiencies and lower overall economic welfare.



Protectionism has political and social repercussions in addition to its effects on the economy. Countries may retaliate with their own tariffs and trade restrictions, which can cause tensions between nations. A trade war could result from this, which would hurt the world economy and heighten political unrest.


Protectionist measures can also have social repercussions, especially for low-income households. Consumer prices may rise as a result of restrictions on the sale of cheaper foreign goods, which may disproportionately affect low-income households who may lack the funds to pay higher costs. This may worsen wealth disparity and cause social instability.


Economic protectionism is a contentious practise that has both proponents and opponents. Opponents contend that it can result in inefficiencies and lower overall economic wellbeing, while supporters contend that it is vital to defend domestic sectors from unfair competition. Protectionist policies' future is unknown, and there is continuing discussion about how they affect the economy, politics, and society.

 


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