Trade Tyranny: ‘Goodwill Growth’ Garbled
The author talks about the insinuated nuances that the protectionism or the restricted trade movement carries and why policy preclusions are necessary that tend to create a disparagement to goodwill gestures that arise out of development and thus restrain the freewill
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Case for protection has been built upon the philosophy that it can be used for making desirable redistribution of income from one section of society to another. Protection makes some people better off, while others are worse off. By providing protection to domestic producers their profits can be raised at the expense of consumers who suffer a loss in consumer surplus as protection denies them consumption of low-priced imported goods. That is, protection redistributes income in favour of domestic producers.
A very concrete negative outcome of a trade war would be that it would make it difficult for US companies to export to Asia, the fastest growing market in the world. On the other hand, the US already runs a trade deficit with those countries. The threat of a trade war would most likely hurt the surplus countries more. Additionally, much of the US trade deficit with these countries derives from US companies operating abroad, exporting products back to the US. Increased tariffs may cause these companies to relocate to the US. If they chose to go out of business, or to seek new markets, rather than moving home, US demand for these products would remain the same and the void would be filled by US domestic companies, producing in the US, albeit at a higher price.
The possibility of protectionism is confusing forecasts for both growth and monetary policy. It will be very difficult to gauge the impact of any rate increases with the possibility of simultaneous protectionist trade policies and large deficit spending.
India would not have entered into trade relations with the US if it did not expect to gain from it. Trade occurs between two countries if it benefits both the trading partners, the developed and the developing countries. Therefore, in our view world trade should be promoted by lifting barriers put up by various countries based on wrong notions about effects of free trade.
Some countries such as the US and Japan have resorted to protectionist measures as a retaliation against foreign countries who restrict imports into their countries. The retaliatory actions of imposing trade barriers have done great harm to the expansion of world trade. New international organization WTO (World Trade Organization) which has replaced earlier GATT has been set up.
WTO has framed rules which every country should observe so that barriers to trade be removed and world trade be promoted without doing any injustice to the member countries. It may be noted that retaliatory activities of restricting imports from foreign countries generally lead to the depression in the economies of the world as it happened during the worldwide depression of 1930s. The retaliatory activities may cause another global depression.
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