Protectionism
Which aspect is more important?

Protectionism was established to safeguard the local industries from the competitive imports from foreign countries. But the underlying objectives for protectionism are deeply rooted in the society. These objectives encompass comprehensive areas in our lives such as, politics, defense, sectional interest and of course social consideration. Economic cost is an issue, and it should be a chief priority when protectionism is concerned. But protectionism affects everyone and all aspects should be considered.

In any country, there are always foreign products that can be supplied at lower cost to the consumer. But these products are made less competitive by the introduction of a concept called protectionism, mainly implemented by tariffs and quotas. Tariffs are an indirect tax placed on imports to encourage consumers to buy local products that are substitutes. There are two types of tariffs, selective and general. Selective tariffs, discriminates a single product, while general tariffs, discriminates a range of products. Quotas are a physical restriction on imports. The are applied through volume and value of imports within a particular time frame. Volume increases the price as suppliers have a tendency to import higher unit value goods. For example, suppliers may concentrate on exporting luxury cars than family cars. But when a quota is introduced on value terms, the supplier will concentrate on exporting lower value goods. But the suppliers with either or both tariffs and quotas placed on their goods will inevitably raise their prices to absorb the extra cost. This is shown on graph 1.1 and 1.2 showing the increase in price. There are many other forms of protectionism, but most countries, if not all implement tariffs and quotas.

Protectionism should be on all aspects and not just solely dependant on one. All areas must be considered and looked upon objectively. The advantages and the drawbacks in the change in the protectionist policies must be weighed to create in the end a better place for all to live. Of course, through time different aspects will be given more emphasis than others, but without an overview of the whole situation, there will be an imbalance on the level of protectionism.

Politically, protectionism is to not only protect local industry, but also to be elected into government. For example, in France the Farmer's Union is so strong they control much of the political issues in parliament. These farmers hold the balance of power for the formation of a government. So for the government or the opposition to please this large bloc of voters they must support the protectionism of their products. They do this not only by tariffs and quotas, but also through the subsidization of their products. Figure 1.3 shows the effect of a subsidy on the price of a good. This makes the good more competitive locally and internationally.

It is in the countries to be self-sufficient, as this helps in times of need especially for defense purposes. Even if the product is produced inefficiently, the country can draw those resources in times of need. Without tariffs and quotas, local industry could be abolished, as it could be less competitive with the rest of the world. This is one of the aims of the European Union (EU) since war as created chaos and destruction in Europe. This self-sufficiency will become implemented in times of war. This allows the EU to be safe its own territories.

All across the world there are many blocs. The EU, Organization of Economic Co-Operation and Development (OECD) and General Agreement of Tariffs and Trade (GATT) are examples of blocs that work together for the interest of themselves and other members. The EU especially looks after its members by having no protectionist policies, but has heavy policies against non-members. This allows perfect mobility of resources and achieves a greater employment of resources. A single country will not have the same advantages as a bloc like the EU.

Welfare and unemployment, are the key issues in social consideration of a protectionist policy. There is a common belief that if Free Trade is implemented with those also applying the same policy, some local industries will collapse, as they cannot produce as cheaply as foreign companies. For example, if all protectionist policies were abandoned in Australia, the small but still important manufacturing sector will lose a great