• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Analyse the reasons for reducing protection and its impact on the domestic and global economies.

Extracts from this document...

Introduction

Analyse the reasons for reducing protection and its impact on the domestic and global economies. Globalisation refers to the process of increased integration between nations as traditional barriers separating economies are broken down, leading to the formation of a global economy. A key aspect of the move towards globalisation in recent decades has been reducing protectionism. Protection refers to any type of artificial advantage that a government gives to its domestic industries. There are a number of different types of protection, including embargoes, subsidies, quotas, export incentives, voluntary export restraints and local content rules, although the most common form is the tariff (a government tax on an import). The removal of protection results in free trade, which occurs when there are no restrictions to the free movement of goods and services between economies. There are a variety of reasons for which nations reduce protection levels, mostly focused on achieving increased efficiency and productivity levels, and this can have a number of impacts on the domestic and global economy. The main reason for reducing levels of protection ties in with David Ricardo's Law of Comparative Advantage. This law arises because of differences in factors of production (land, labour, capital, enterprise): as countries differ in both the quality and quantity of the resources at their disposal, a country may lack the appropriate factor endowment to produce desired goods. ...read more.

Middle

This has boosted the long term efficiency of our firms and industries. Reduced protection levels and structural change has increased international competitiveness, as it has meant the Australian economy can produce goods and services at lower costs, increasing overseas demand for exports and reducing consumer reliance of imports. It has also meant a greater variety of products for consumers, as companies previously unable to compete in the local market due to protection can now compete. Within Australia, the number of car models available for purchase has risen from 75 in 1985 to 250 today. With this has also come cheaper prices for goods, bringing higher standards of living and improved customer service. Reduced protection levels in Australia has also led to higher productivity growth: Australia's productivity growth during the 1990s averaged 3% (as opposed to 2% in the 1980s), largely a result of reduced protection levels. Australia's economic growth rates have also been high, averaging over 3% for much of the 1990s (above OECD average) and currently standing at 2.5% for 2005-06. Embracing free trade has meant that our trade flows have changed dramatically; our trade dependence has increased 10% since 1968, indicating that X and M are now a greater proportion of aggregate demand, where AD = C + I + G + (X - M). ...read more.

Conclusion

In contrast, global protection levels remain high in the agricultural sector, severely affecting developing countries and exacerbating inequality. The WTO has failed to make progress on issues of development in the Doha Round of trade negotiations. Though the Doha round made it easier for developing countries to obtain cheap pharmaceuticals, agricultural protection remains high and the recent trend towards bilateral and regional free trade agreements has been accelerated. This has done little to help smaller developing economies from accessing rich countries' markets, and has therefore entrenched global inequalities. Reduced protection can also result in environmental degradation. Overseas producers may be able to produce some items cheaply because they do not have to comply with the environmental standards in advanced economies. However, some progress was made on this issue at the 2001 WTO Doha Ministerial Conference, in which the members of the WTO agreed to include environmental standards on the negotiation table for the Doha trade round. This means countries are able to impose import restrictions on goods produced using environmentally damaging practices. In conclusion, reduced protection levels have had enormous impacts on both the domestic and global economies. As protection levels continue to decrease under pressure from the WTO, the competitiveness, efficiency and productivity of both domestic and global economies will continue to increase. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Why has GDP growth been so slow in Somalia?

    Citizens of the West may go to bed with a clear conscience, thinking that the $15 billion they gave as a response to the debt crisis was enough, however relative to the scale of the debt (nearly $1500 billion) this was quite insignificant, little more than 1%.

  2. Examine the roles and place of trade blocs in the global economy.

    In the USA, for example, NAFTA, has helped in keeping the prices of textiles, lumber and some agricultural goods low. However, this does not prove true for all free trade blocs, as the EU and MESCOSUR have created higher tariffs and other restrictions to goods and services from external countries

  1. Where does the World Trade Organisation fit in the overall scheme of international public ...

    The WTO, like the GATT before it, is a "contract organisation" bringing together a large, diverse group of sovereign nation-states. Its always-brittle political consensus can only tolerate rules interpreted as much as possible according to the "letter of the law", i.e.

  2. David Ricardo theory of comparative advantage

    therefore after trade a US worker only spent 2.5 hours wage to buy 3 hours products, this means the real wage of US worker has increased by 20%. For UK worker to produce 1 unit cloth still have to spend 4 hours but after trade only produce 2/3 unit cloth

  1. Free essay

    does uk housing market warrant government intervention

    There are many small firms in the house building industry so It is also the case that the private house building industry in the UK has a preponderance of small firms. Whilst there are a handful of large, well-known house building firms, DTI figures show that 96 per cent of

  2. trading blocs

    off of US workers as US firms relocate to take advantage of low trade unions, labour costs in Mexico and the flood of Mexican immigrants who would steal the US workers' jobs or accept bad working conditions that the Americans would be obliged to accept too to keep their jobs.

  1. Is Mexico better off with NAFTA

    Another factor is the East-Asian countries that have entered the WTO. The consequence of this is new markets that are even cheaper for American manufacturers than the Maquiladoras. "A fourth to a fifth of Mexico's million-plus maquiladora workers once produced textiles and apparel, many of them in factories near the US border.

  2. International Trade - I have been asked to investigate the possibility of a company ...

    The club at Madrid also boasts a variety of facilities this shows that David Lloyds is investing well and developing. Although the club is not named David Lloyds it is owned by Lloyds.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work