04/10/2020
Protectionism vs. Free Trade
Protectionism
Benefits
Provides more growth opportunities for local
industries until they can enter international
market and compete with other global
companies.
Protectionism introduces policies, tariffs and
quotas that reduces import levels. This will
contribute to balance of trade.
Domestic companies provide local job
opportunities and lead to increase employment
rates.
Protectionism policies helps domestic industries
grow and increase production, boosting the
economy’s GDP
Free Trade
Benefits
Free trade can increase economic growth since
foreign products can freely flow through borders
and each nation can take advantage of their
strengths in the economy.
Stimulates competition within countries and
make them competitive in the global market.
Subsidies for local industries are removed and
government can use funds for better uses.
Promotes foreign investment which adds capital
to the country. This can help improve local
industries and domestic businesses.
Global companies have more expertise on
developing resources and they can help local
companies train and access new methods.
Local companies can now access the latest
technology from foreign partners and use them
to grow local economy.
Damages
Since there are no foreign producers who could
stimulate competition between domestic
producers, there is no technological
advancement or innovations for possible new
products.
Consumers can access domestic products and
services in the market due to the limitations of
the flow of foreign products.
Due to lack of competition, product prices can
increase due to supply and demand the country
may have difficulty producing.
It can lead economic, political and cultural
isolation since there is limited exchange of goods,
ideas, or culture with other countries.
Damages
Increased job outsourcing due to reduced tariffs
on imports, allowing foreign companies to
expand on different countries.
Foreign companies take advantage of on
developing countries who don’t have laws on
intellectual property and they can steal ideas and
inventions from local companies.
Local businesses cannot compete with advanced
foreign competitors and close. This can increase
unemployment, poverty and crime.
Due to increased job outsourcing, multinational
companies take advantage of countries without
labor protection and exploit workers to poor
working conditions.
Countries with no environmental protection can
face natural resources depletion and degradation
of natural environment.
Smaller developing countries may have
difficulties on recovering revenue loss on import
tariffs.
REFERENCES:

Amadeo, K. (2020, April 27). Free Trade Agreement with their Pros and Cons. Trade Policy. Retrieved
from https://www.thebalance.com/free-trade-agreement-pros-and-cons-3305845

Amadeo, K. (2020, April 27). Trade Protectionsim Methods with their Examples, Pros, and Cons. Trade
Policy. Retrieved from https://www.thebalance.com/what-is-trade-protectionism-3305896

CFI Education. (n.d). What is Protectionism?. Protectionism. Retrieved from

https://corporatefinanceinstitute.com/resources/knowledge/economics/protectionism/