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Unit: International Trade. Topic: Free Trade vs. Protectionism . Learning Targets. I will be able to explain what happens when trade barriers are put into place. I will be able to explain the arguments for and against free trade. What happens is….
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Unit: International Trade Topic: Free Trade vs. Protectionism
Learning Targets • I will be able to explain what happens when trade barriers are put into place. • I will be able to explain the arguments for and against free trade.
What happens is… • When barriers (tariffs, quotas, regulations) are put on imports, then resource cost increases for foreign producers. • Foreign producers then typically raise prices that consumers pay for the imported goods. • Foreign goods are more expensive, so it is possible that consumers will buy more domestic goods when barriers are used.
What happens is… • Typically, countries with a higher standard of living have higher wages, more labor laws and higher environmental standards. • When there is free trade, companies will relocate production facilities to countries with lower standards because it is cheaper.
Arguments Against Free Trade (Yay, Protectionism!) • Because consumers buy more domestic goods, there will be more domestic jobs. • If businesses can’t outsource, then domestic wages do not have to be competitive with foreign wages. • With free trade, businesses can outsource to countries with lower environmental standards (which is harmful to the environment). • Newly starting industries (infant industries) do not have the ability to compete with global companies. • If a country has barriers on us, we can negotiate with our own barriers. • Free trade encourages dependency; with barriers in place, the economy will be more diverse.
Arguments Supporting Free Trade (Boo, Protectionism!) • Free trade increases variety. • Increased competition creates lower prices and more innovation. • Trade barriers harm consumers (because of higher prices). • Free trade increases global competition, allowing for lower-income countries to develop a larger market. • Developed nations outsource labor to developing nations, which increases employment in those countries. • Because everyone can produce at the lowest possible cost, then all nations are wealthier (leading to more jobs and higher wages). • Free trade encourages peaceful negotiations.
