Difference Between Free Trade, Protectionism And Methods of Protectionism

Difference Between Free Trade and Protectionism Trading has always been a touchy issue between countries. This is because a lot of countries have opposing views when it comes to trading in their nations. This is especially true when dealing with international traders. Many policies have been enacted and implemented by different nations when it comes to getting economic stability. Two of the most widely debated economic concepts is free trade and protectionism. Free Trade One of the current methods that countries employ when it comes to trading is free trade. The free trade policy entails governments to not provide tariffs against imports and subsidies to exports. In this policy, countries trade goods without the hindrance of steep tariffs and can pass through borders without restriction. Many of those who support free trade vs protectionism posits that implementing free trade as the main trading policy can give many benefits. Some of these benefits include: 1 Increase access to high-quality goods for lesser price 2 Reduce imported-input expenses leading to economic growth 3 Improves production efficiency and promotes innovation 4 Drives healthy competition Furthermore, the proponents of the policy believe that lowering the prices is better than lowering income and displacing workers. Alan Binder, professor and writer in the Library of Economics and Liberty, claims that productivity highly affects wage level. However, oppositions to the concept claims that free trade only does more damage than good. Hence, they offer a different concept, protectionism. Protectionism The basic agenda of protectionism is to limit the access and freedom of foreign industries within the country. This is to prevent the rise of unproductive competition. This is done by putting in stiff tariffs and regulations on goods that are imported from other countries. As a short-term remedy, protectionism can be a great trading countermeasure. However, in the long run, it can lead to destructive ends. Four Methods of Protectionism Countries who are implementing protectionism in their international trades often choose between different methods of applying the concept. However, there are four methods that stand out from the rest: Placing Tariff, Subsidize, Imposing Quota, Lower Currency. Placi...