Protectionism in United States

Protectionism in United States

International and national businesses in the world strive due to the favorability of a wide range of factors in the market. Some of the factor could be internal such as employees and shareholders, while others could be external. The latter entails factors such as technology, competition, consumer diversity, and government interventions (Luthans, 2017). Managers have always argued on the importance of government presence in the success of their businesses within a country. An example is the United States government that has played a crucial role in providing conducive environment for business expansions in the region. One way the United States achieves control is through the use of government protectionisms that entail the creation of policies that regulate the flow on foreign products into the country, to help improve the markets for domestic products. It is important to address the concept of government protectionism in the United States and its impacts on global economy.

History of Protectionism

The issue of government protectionism in American began in the era of mechanistic business models in the 19^th and 20^th centuries. The government leaders at that time had the ideologies of protecting domestic companies through policies that would protect them from international businesses (Luthans, 2017). They passed the Anti-Dumping Act in early 20^th century to control the pricing of international products in the country. The government had noted that external suppliers lowered the prices of products, which affected the competitiveness of local products that had higher pricing (Borrus & Goldstein, 1987). The government introduced Escape Clause in their international deals during the mid of 20^th century to allow the government the opportunity to modify deals. The clause allowed the government to exit a trade deal and to make modifications to the policies to limit international businesses that threatened local firms.

Theoretical Framework for Support

Some analysts have proposed some of the reasons that can cause citizens in American to have the different viewpoints on the protectionism act. The Heckscher-Ohlin model bases its theorem on the occurrence of a costless factor within various industrial sectors (Melgar, Milgram-Baleix, & Rossi, 2013). The founder argues that the skill of the employees will influence their support on a particular model. The skilled and educated workers in the country will be more open to trade restrictions in comparison with those having no specialization. Workers in unskilled sectors indicated a high affinity for free trade that did not threaten their basic livelihood. The occupation of some of the employees in importing companies restricted the creation of the protectionism acts because of job insecurities.

Viewpoints for Protectionism

Supporters argue that the model will support the establishment and growth of local businesses in the country. Trade restrictions makes it challenging for international businesses to make competitive entries into the market (Williams, 2019). The restriction allows domestic industries to grow as the number of consumers for their products significantly increases. These supporters believe that restrictions will prevent the influence of international countries in America. Some countries could provide financial support in United States, intending to venture some of their companies into the country through that influence (Williams, 2019). These restrictions will ensure that such countries cannot influence United States’ operations through their financial interventions.

Other supporters of the model have proposed the protection of jobs and young industries in the country. The infantry model focuses on emerging companies in the country, which may crush due to competition from the foreign market (Williams, 2019). Experts argue that the protectionism will ensure such companies can survive and compete favorably within the country without fear of external markets. Also, these restrictions help protect American jobs that may get threatened by new entrants. Stiff competition from foreign companies can reduce the productivity of local companies, which can cause layoffs. The restrictions will ensure that the government can protect these jobs by evaluating the capabilities of foreign markets.

Viewpoints against Protectionism

However, opponents have argued against extreme protectionism due to its impacts on the market. One problem is that countries can implement retaliatory measures that can prohibit the United States from making foreign exports. The creation of such restrictions affected the ability of the United States economy to survive the Great Depression due to policies by other nations (Williams, 2019). Placing such restrictions increases the vulnerability of the country as it creates conflicts with other international companies (Luthans, 2017). Another problem is that these protectionism policies will increase the costs of some of the foreign products. When the government raises the tariffs and import taxes, the international companies may be forced to raise their product prices. Such prices will negatively affect consumers of these products due to their extreme higher prices. Due to the importance of such products, citizens in America may be forced to abandon some products to avoid the new high prices. For example, raising Chinese imports at the borders will cause these firms to increase the prices to cover for the tariff raises (Caldwell, 2010). Unfortunately, the tariffs will affect local companies that have supply chains in outside countries, which could affect their ability to compete and provide efficient products. Also, local companies can use such an opportunity to raise their products to increase their profit gains for such opportunities.

These tariffs affect the competitiveness of companies, which have affect their production capabilities. Some international companies may find it challenging to produce new and quality products with such tariff restrictions. They may opt to abandon the market in search for better government interventions, which affects the consumers’ choices. Free trade across the borders increases the variety of products available for consumers. The competition ensures that all producers create high quality that will survive in the high competitive markets. Unfortunately, these restrictions may reduce innovations by local companies due to the lack of competition from international products. The consumers’ varieties will significantly reduce to the lack of product diversification within various key industries. Some of these companies may take advantage of such tariffs by lowering the quality of products to meet the cost criteria of consumers. Companies can opt to retain their normal pricing regardless of the taxes by creating substandard products that fall in line with the consumers’ demand cost.

Trade restrictions can result in the development of cold trade wars between developed countries. Countries specialize in different key products, which makes international trades essential for the global economy. However, creating restrictions can have some significant damage on such relationships. The recent standoffs between United States and China due to tariff changes reveals that costs of such restrictions (Caldwell, 2010). They reduced the trades between the two countries due to their inability to come up with trade agreements. However, consumers tend to suffer from such standoffs between the two countries. Farmers significantly suffered from these trade wars because they reduced the supply of agricultural raw materials that would help in the production process.

Effects on Increasing Restrictions

An increase in the restriction policies by the United States can have significant effects on the global economy. The first effect is that the total transactions carried out between the United States and other countries will significantly reduce. For example, President Trump proposed to cut down the imports of steel, aluminum from foreign countries, which will reduce the trade deals done between such countries (“BBC NEWS,” 2019). The reductions will reduce the growth of the global economy due to the lack of enough international markets. Another implication is that importers of American products can create restrictions on such products, which will affect the growth of some of the industries. Trade wars could arise between partners of the United States in retaliation due to their increased restriction policies. A country such as China can increase restrictions on manufacturing companies within the United States and exporters of products within China. Another implication is that the restrictions can result in creation of new partnerships that may improve global economy (Adams, 2018). These countries will seek partners will relaxed restriction policies that will improve industries and creation global competitiveness. The survival of global economy depends on the interdependency and mutual relationships between global economies. However, such restrictions will have an overall injurious effect on these relationships, which will affect global economy.

In conclusion, business survive due to the stability and restrictions created by respective companies. Government protectionism refers to policies created by individual governments aimed at restricting businesses by international companies through import taxes and tariffs. The ideology has had both supporters and opponents based on their arguments. Opponents claim that the restrictions will affect global economy by restricting the amount of transactions made. They argue that restrictions will inhibit innovation, competition, and reduce diversity of products. Proponents argue that restrictions will benefit local companies by reducing competition and increasing available markets. Increasing these restrictions can have effects such as reduced global transactions, the creation of trade wars, and overall damage on global economy.

References

Adams, K. (2018). What does protectionism mean for the future of the American economy? Marketplace. https://www.marketplace.org/2018/03/09/what-does-economic-protectionism-mean-future-american-economy/

BBC NEWS. (2019, May 10). Trade wars, Trump tariffs and protectionism explained. Retrieved from https://www.bbc.com/news/world-43512098

Borrus, M., & Goldstein, J. (1987). United States Trade Protectionism: Institutions, Norms, and Practices. Nw. J. Int’l L. & Bus., 8, 328.

Caldwell, A. J. (2010). U.S. trade, protectionism and the global economic downturn. Hauppauge: Nova Science Publishers, Incorporated.

Luthans, F. (2017). International Management: Culture, Strategy, and Behavior. New York: McGraw-Hill

Melgar, N., Milgram-Baleix, J., & Rossi, M. (2013). Explaining protectionism support: the role of economic factors. ISRN Economics, 2013.

Williams, N. (2019). The Resilience of Protectionism in US Trade Policy. BUL Rev., 99, 683.