What is protectionism
As per Wiki
Protectionism is the economic policy of restraining trade between nations, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive government regulations designed to discourage imports, and prevent foreign take-over of local markets and companies. This policy is closely aligned with anti-globalization, and contrasts with free trade, where government barriers to trade are kept to a minimum.
Now US was ( I am saying was and not is ) considered as free trade country but suddenly all the policies goes into the pocket when the situation turns bad and now they have a higher Tax for the companies doing outsourcing.
So now one of the question that comes up is. Is Free trade a problem or a solution ?
Coming back to protectionism many other countries like India have always been supporter of protectionism and are adopting new policy of protectionism. Most recent is the duty on the import of Steel.
Now the question is Protectionism !! problem or solution to the current problem.
Say if we take the example of the US first.
They have the policy of higher tax if a company outsources the work.
Whats the positive part of it.
Generate more jobs in US.
Whats the negative part of it.
It would mean the companies cost would never come down and that would mean more output cost and so higher price of the finished product. Higher the price of finished good there are more chances that the demand for the good would go down creating inventories to pile up.
Similarly if we look at current Indian scenario the same things apply. As we do not get the Steel cheaper through import the positive part of it is it allows the Indian Steel manufacturer to prosper but the negative impact is where steel is used as raw material like cars manufacturing would have higher cost of production and thus eventually destructing the demand in many such sectors.
So according to me Protectionism is clearly a problem and not a solution to global turmoil
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