Question

What is protectionism?  Should the U.S. increase protectionist policies with our international trade partners?  Why or...

What is protectionism?  Should the U.S. increase protectionist policies with our international trade partners?  Why or why not?  (use the concepts of absolute and comparative advantage as part of your rational) 

Homework Answers

Answer #1

Protectionism is anti free trade policy where government imposes restrictions on free flow of goods and services across the frontiers.

Protectionism policies are not considered profitable for country as whole. Consumers are negative affected by such policies. Prices shoot up and consumer welfare get diminished. Free trade policies help to optimize the comparative advantages and both countries tend to gain from trade. Competition leads to efficient outcomes. Thus, government should not restrict trade.

But few countries such as china are keeping their currencies artificially low and taking advantage of free trade. Here, government must take strict actions against such governments. Free trade is beneficial so long as all countries follow honest free trade practices.

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