Protect Our Key Industries Essay Research Paper

Protect Our Key Industries Essay, Research Paper

Let us protect our key industries from unfair foreign competition

From the Beginning K

In addition to adopting a free trade policy, Government has protected the key US industries from unfair foreign competition. Domestic industries feel pressure from foreign competitors because of lower pricing and better quality products. For these reasons, competition can become intense and has caused our industries to seek government protection. Protectionism brings together business and labor, sixteenth century thinkers and twentieth-century economists.

Protectionism builds on the power to tax one man to help the business of another. The government s primary concern is national income, national spending and national employment.

Fewer industries need protection over foreign competition because of external influences over the global marketplace. Over a period of a few months, Asian and Russian economies have collapsed; a recession has been brought on by currency weakness and lower oil prices. As a result, the export of US goods to much of the world has decreased, corporate earnings weakened.

When this crisis hit, the US became one of the few markets where excess production could be sent. Many of the world s struggling economies have counted on exports to life them out of recession. The US has earned the role of importer of last resort.

Trade tensions escalate over charges that products exported to the US by several countries have been sold below market value. U.S. political leaders have started to discuss proposals that could further fuel any protectionist sentiment. Industry leaders contend that strong measures are necessary, even at the risk of foreign retaliation. The staunchest allies of these politicos are labor unions to whom government protection is of crucial importance. However, from an economic perspective, a trade deficit in and of itself is neither good nor bad. It simply means that in a given year, the citizens of one country purchased more goods and services than they sold overseas. A deficit might result because the economy and purchasing power of consumers in one country grew faster than in others. That would be a sign of economic strength. Alternatively, a deficit might result, for a short period, because a country inflated its currency. That would be a sign of unsound policies.

There is lot of reasons that demand some key industries to be protected. One is dumping by foreign firms. Contradictory line of protectionist assault on the free market asserts that the problem is not so much the low costs enjoyed by foreign firms, as the “unfairness” of selling their products “below costs” to American consumers, and thereby engaging in the pernicious and sinful practice of “dumping. By such dumping, they are able to exert unfair advantage over American firms who presumably never engage in such practices and make sure that their prices are always high enough to cover costs. Another cause is protection of infant industries. The government should provide a temporary protective tariff to aid, or to bring into being, an “infant industry. Then, when the industry was well established, the government would and should remove the tariff and toss the now “mature” industry into the competitive swim. Indeed, in recent years, older industries that are notoriously inefficient have been using what might be called a “senile-industry” argument for protectionism. Steel, auto, and other out competed industries have been complaining that they “need a breathing space” to retool and become competitive with foreign rivals, and that this breather could be provided by several years of tariffs or import quotas.

There is one other reason for protectionism. Presently America is facing a big trade deficit. Japan is the third largest export market for American products. However, Japan has high tariffs on many products. Japanese trade practices and policies create barrier to U.S. exports, whereas America has fewer restrictions on Japanese imports, and the result is not only substantial trade deficit with Japan but loss of jobs in America. Similarly, European Union is the largest trading partner of America but importers in the European Union face many restrictions to buy American products leading to trade deficit of America. China is using high tariffs amounting to 100% on some products like vehicles to protect its domestic industries. Thus, America needs to protect some of its industries for their survival in the international and national markets.

Industries can be protected from foreign competition in two ways. Firstly by putting tariffs on imported goods and secondly by quota. Import tariffs are taxes imposed on commodity imports. They may be levied on an ad valorem basis, i.e. as an amount per unit. Their purpose may be solely for raising revenue, in which case the home-produced product corresponding to the import would bear an equivalent compensatory tax. In international trade, the quantitative limits placed on the importation of specified commodities. The protection afforded by quotas is more certain than can be obtained by raising import tariffs as the effect of the latter will depend on the price elasticity s of the imported commodities. Quotas, like tariffs, can also be used to favor preferred sources of supply.

One method used to measure the degree of protectionism