Protectionism

Finance Allah Shmoop What is protectionist This video is brought

to you by our friends at Trojan Remember Trojan protection

against sleepless nights A protectionist policy and essence tries to

financially proto checked the businesses of the country while a

protectionist policies one established by the local economy or country

with the aim of financially protecting the businesses with in

that country Example it is protectionist policy to charge fifty

dollars a bottle import tax against French wines being imported

into California where local Napa wine people have a tremendous

lobby and for some strange reason are afraid of competing

mano a mano or a rather bottle Oh bottle o

We're local Napa people confident that their wine was a

better product than that of the French Then they wouldn't

bother pushing the government tohave taxes against them Damn foreigners

exporting their swill Well this process sounds rational but in

practice the game is oh so never simple For starters

many countries actively back They're exporting companies in a weird

kind of economic war called dumping which has nothing to

do with either countries Bathroom habits The process of dumping

usually involves high fixed costs high sunk costs in high

capital expenditure industries Plus well then there's the manufacture of

semiconductors Yeah such that a country with easy access to

very cheap labor cheap capital and no regard to environmental

pollution Well they can match with arsenic or gallium arsenide

Onda silicon semiconductors at prices dramatically less than comparable builds

in the United States with the hope of either corrupting

those companies are essentially buying market share so that they

become a major player around the world Will the competitive

situation then demands all kinds of moral and ethical questions

revolving around what the notion of quote fair unquote trade

means Like you know when it's not about love and

war Well the same friction gets laid in a protectionist

policy where rather than imposing taxes are import duties from

foreign distributors local countries place a quota on the quantity

or volume of product allowed into the country From that

interloper at the extreme end there's a complete embargo blocking

all importing of that good strategically politicians aim protectionist policies

domestic industries because in essence in the short run each

goods sold to a foreign distributor exporting their products into

the U S Takes away some value from a domestic

taxpaying producer Right So if we bought all our cars

from Japanese and Korean producers and bought none of them

from American producers well all our dough would be shit

doubt overseas right Well Additionally balance of trade then becomes

an issue If the U S Could import a hundred

percent of everything it uses at half the price at

which it manufacturers that locally well life would be grand

for Americans living large on the Macy's White Flower Day

half off sale for about two quarters or a male

maybe half a year right Think about it If you

could buy that gap shirt instead of paying forty eight

dollars for the rugby style thing you could buy it

for twenty four dollars for the exact same shirt Well

why wouldn't you after that our existing industries would essentially

evaporate is meaningful economic entities and with no revenues coming

to them from sales Well there'd be little money to

send across our borders to buy things like oil and

Japanese trucks Okay well adding yet more complexity to the

notion of protectionism This black and white picture of importing

and exporting one hundred percent of any given good is

usually incomplete That is Mercedes makes its engines in Germany

but stamps its bodies in the U S While using

tires from Korea France and Japan and windshield wipers and

other accessories from other manufacturers in nonunion red states in

America and from Latin America They're all assembled in North

Carolina So how do you even begin to calculate what

a protectionist policy would do in this very cloudy vague

sense of who owns what who benefits from what where

and how much protectionist policy would do to help her

harm the global balance the power The broader goal here

and general notion is that the world receives a quote

peace dividend unquote when company's heir not at war in

this unhealthy way consumer's benefit when companies simply compete to

deliver higher and higher quality product for incrementally better value

to the end user If protectionism gets in the way

of that liquid flow of Darwinian economic competition well it

just adds friction where it really isn't needed And it's

simply inefficient So to recap protectionism stopping the flow bad

but the's thing stopping the flow good