Trade and Protectionism

There were some thought-provoking posts from Pierre Lemieux, a Canadian economist from Universite du Quebec en Outaouais. I took some ideas from his writes international trade and protectionism. In this article “You Can’t Benefit from Free Trade if You Don’t Have a Job. Right?” he carved that:

The important point is that free trade benefits consumers more than its competitive pressure harms producers. Economic theory provides a nice geometric demonstration of the proposition that the total cost of protectionism for consumers is higher than its total benefits to producers. The demonstration can be (imperfectly) explained in plain English: if free trade harmed producers more than it benefits consumers, the former could outcompete their foreign competitors by bribing domestic consumers with better prices and still gain compared to ceding the market to foreign producers – and protectionism would not be necessary. When domestic producers are unable to compensate consumers for not patronizing foreign suppliers, it means that free trade benefits consumers more than it harms producers.

From Pierre’s second post “A Protectionist Utopia?

That free international trade benefits most people, that it increases general prosperity, can be grasped with a reductio ad absurdum. If protectionism were good between countries, it would also be good between states, regions, towns, etc. It would be worth protecting California against Mississippi, if only because wages are 39% lower in Mississippi than in California. “If it could save only one job…” is as bad an argument against international competition as against domestic competition. Protectionist measures do favour some individuals, but it is at the high cost of reducing opportunities for most individuals. And even those who seem to benefit from protectionism, or their children, are likely to lose out in the long run.

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