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Protectionism. What do you consider to be the main circumstances in the field of international trade when protectionism might be justified?

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Business in EUROPE Assignment 2 Protectionism 1. What do you consider to be the main circumstances in the field of international trade when protectionism might be justified? There are three major powers that dominate trade today; they are Japan, North America and Europe. USA has been identified as one example of economic and political union and has been a leader of world trade investment for some time. The success of US trade is attributed to the fact it has been able to operate in such a large free trade area and the size of the companies has given them greater scope to attain economies of scale. Japan has become more powerful and improved its position in the world market in recent years and has started to encroach on the US's dominance. "One of the important motivations, for developing the Single European market has been to emulate the USA's high degree of integration in an attempt to give firms freer access to a wider market... and strengthen the position of Europe over other leading trade blocs."(1) The EU became a threat to America and Japan, as they saw it and they threatened to use protection against European imports, as greater internal efficiency would lead to more effective competition. These global oligopolies consist of a number of large companies who dominate the market, this does not give much scope for newly developing countries to achieve a lot of ground when it comes to trade as they are unable to compete with big, well established firms or countries. ...read more.


Colchester and Buchan (1990) assert that 'within GATT rules the creative dumping-inquisitor can demonstrate just about anything' (p.201)" 100 accusations each year are levelled against non-EU countries for dumping by companies who do not like the harsh reality of foreign competition most of these are against Japanese companies and it reflects the fact that the EU lacks competitiveness, the fear is that retaliation will start if the EU continues in this way. The circumstance that protectionist measures would be acceptable is if one country has a glut of a particular product and tries to sell that product in another country well below the actual cost of production by exporting the surplus to support their own internal market. This protectionist measure should be used carefully and not abused, as retaliation would affect our own economy. The protectionist measures could be used to protect employment as in times of world recession tariff barriers could be raised to prevent cheap imports from flooding into the country. Britain has suffered from balance of trade problems in the past and this would be one way to counter this by increasing tariff barriers on imported goods encouraging people to buy British made products. Protectionism could be used in a number of industries including the textile industry to protect the workers from low wage countries such as India who produce cloths at extremely low prices; this would enable them to be able to compete with these low prices. ...read more.


This could be justified in that again we are not saying they cant import we are saying they must meet our standards which could be extremely high. The problem would arise if our domestically produced goods did not meet the same standards. 7. Bilateral and multilateral trading agreements these are agreements between countries to limit the number of each product imported and exported between the countries. This can be justified, as it is a mutual agreement between the countries involved. 8. Sanctions these stop trade between countries i.e. Iraq, Serbia etc. they can be justified because the government of that country is doing something that the other governments do not agree with and it puts pressure on the government to change its policy. It is not easy to impose protectionist measures on to another country, as they are liable to retaliate as already stated there are some cases when it can be justified if it is to protect a newly developing country or if it is to rectify deficits in the balance of payments when more money leaves the country than is coming in, but it can cause problems within the economy. Some form of protectionist measures can have an effect on unemployment and help to reduce it. The government has to weigh up the benefits against the costs and it is a delicate fine line as governments of other countries could see it as a threat. ...read more.

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