Trade Protectionism
Protection is any attempt by the government to give the domestic producer an artificial advantage over a foreign producer. The government can protect its industries in three ways: restricting the quantity of imports (quotas), lowering the price for domestic producers (subsidy) or increasing the price of imports (tariffs). Australia now stands at the crossroads of two paths. Should we continue as we are, reducing tariffs, which since the mid 80's has seen Australia's ratio of exports and imports to Gross Domestic Product (GDP) each rise from around 15% to 20%? On the other hand, should we look after what industry we still have and protect the inefficient ones? Australia had been one of the largest advocates for protectionism up until the 70's when the level of protection began to fall, and by 2000 is projected that the average rate of protection would fall to 5%. This is in line with most other developed countries Infant industries will be killed off by the market unless they are given protection and allowed to grow up and produce economies of scale. Dumping by overseas firms to flood the market and sell at below production costs may destroy domestic producers if they are unable
Diversification of production protects economy from fluctuations of one industry. Diversification helps to spread the risk. Inflation increases because reduced competition, production costs and import costs increase, wage costs increase In the short term it will be. Unemployment is a loss in potential output, which sees the economy working inside its Production Possibility and results in a GDP gap. Unemployed people also have less expendable income and leads to a reduction in aggregate expenditure. There are also the social effects of unemployment which should be taken into account. Increased employment by protecting an industry which otherwise would not exist. Economic modeling states that in the short term the losers of reduced protection will be those who are employed in an inefficient industry. Without the aid of tariffs, quotas etc these industries will be out competed by the more efficient foreign companies. This leads to the downfall of domestic producers and the loss of jobs. But, is this a bad thing? Through trade liberalization and a reduction in protection, some industries may be hurt, as was the case with the car and textiles, clothing and footwear
Some common words found in the essay are:
ARGUMENTS PROTECTION, Production Possibility, , Product GDP, Deficit CAD, CAD Australian, short term, domestic producers, Account Deficit, current account deficit, Current Account, arguments protection , account deficit, deficit cad, reduction protection, trade liberalization, account deficit cad, current account, protection , inefficient resource, arguments protection,
Approximate Word count = 816
Approximate Pages = 3 (250 words per page double spaced)
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