Task2 - Ethics >> Protecting Local Markets

"Protecting Local Markets"

Many countries around the world are pushing for an increase in trade by reducing national protections on markets. However, other countries would like to protect their domestic markets.

Do you think market protection mechanisms should be increased or reduced?

The history of international trade is a long one. Countries around the world have engaged in the import and export of goods and services for thousands of years. However, some nations have restricted access to their markets with various tools, and some people believe that those restrictions should be relaxed.

Governments around the world have various tools at their disposal to control international trade. Firstly, tariffs-a type of tax- can be imposed on goods that are imported into a country. Tariffs are often implemented with a view to protecting local industries. For example, a developing country may be in the process of establishing a certain type of manufacturing industry. If, for instance, this third world country was attempting to manufacture cars, their local car manufacturing industry would find it impossible to compete against the established multinational manufacturers. It is unrealistic to expect to be able to compete against Japanese and Korean car makers. Consequently, tariffs can be imposed on imported vehicles in order to protect the local industry and give them a more level playing field. In this way, local industries have an opportunity to become established.

Another tool at the disposal of governments is to subsidize local economic activity. Subsidies are financial assistance from the government that aim to support local industry by once again giving them a competitive advantage. By way of example, the American government subsidizes agriculture in the USA. This means that American farmers are actually given a financial incentive to grow their crops.

To encourage free trade around the world both of the above protective mechanisms need to be implemented. For markets to truly be free tariffs and subsidies must be abolished. However, consideration does need to be given to the possible consequences for local markets.