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The Global Financial Crises and Protectionism

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The Global Financial Crises and ProtectionismQuestion No.1In the time when there is sharp economic contraction then there is shutdown of somefirms or there is less need for the labor in the country. This situation results in the lay-offs of theemployees. Thus the employees and the labor unions make lobbies and call for the protection oftheir jobs from the foreign competition (Cernat, L and M Madsen 2011). When the there isprotection from imports of the goods from the foreign countries then the demand for the localproduct is protected. This protected demand for the local products creates demand for the laborand the lay-offs are reduced. Moreover protection from the import of the labor from othercountries will also protect the jobs in the country (Cernat, L and M Madsen 2011). On other handduring the boom period, there is demand for the labor in the country and people don’t worrymuch about their jobs. So there is more calls for the protectionism from the foreign competitionwhen there is sharp economic contraction than the boom period (Evenett, S., Wermelinger, M.2010).Question No.2Although there were measures against the protectionists during the contraction period of2008 to 2009 and the rules like world trade organization were there to stop the protectionism butstill these measures were modest and many countries were able to protect their local producersfrom the foreign competition (Cernat, L and M Madsen 2011). Some of the countries use coulduse the different techniques to protect their producers from the foreign competition without goingagainst any of the measures or the rules of the World Trade Organization. Some of the countriesprovided subsidies to their local producers which able to protect from the foreign completion andsome countries used the bureaucratic changes to protect and put limit imports. So we can say thatthe measures against the protectionists were modest during the contraction period of 2008-9(Cernat, L and M Madsen 2011).Question No.3During the contraction period of the 2008 to 2009 some of the developed countriesprovided subsidies to their local automobile producers which were able to protect from theforeign completion gave large subsidies to the domestic producers (Evenett, S., Wermelinger, M.2010). The domestic producers were able to produce the goods and services at lower costs andthe subsidized products limited the imports. This was not a reasonable thing for the internationaltrade as it has put barriers on the foreign trade. This would put the companies to shift theproduction from the more efficient plants to less efficient plant (Evenett, S., Wermelinger, M.2010).Question No.4The protectionism will protect the jobs in the short run but the in the long run theprotectionism may not serve the purpose of protecting the jobs of the local people (Baldwin, Rand S Evenett 2009). For making the protectionism work in the long run for protecting the jobs,the companies must become ultimately more efficient than the before and also the countries mustpromote and support the industries that are sustainable in the long run. If these measures are notused in an efficient way then the protectionism will make the things worse (Baldwin, R and SEvenett 2009).Question No.5The rebounded volume of international trade in during the year 2010 tell us that a modestincrease in the demand of the of the local production can be increase the production of the goodsand services in other countries and a part of this demand can be served by the production of thecompanies in the other countries (Bown, C and M Crowley 2012). So the increase in the demandcan result in the increase in the volume of world trade. This is because of the global nature of theproduction where the parts of production may come from a number of countries and theassembly these products can take place in any country and the anywhere in the world (Bown, Cand M Crowley 2012).This fact tell us that because of the global nature of the production there is morevulnerability for the world economy to the trade wars in the future more than the past. References:1. Baldwin, R and S Evenett (2009), “The collapse of global trade, murky protectionism,and the crisis: Recommendations for the G20”, CEPR, 5 March.2. Bown, C and M Crowley (2012), “Emerging economies, trade policy, andmacroeconomic shocks”, Working paper, Federal Reserve Bank of Chicago.3. Cernat, L and M Madsen (2011), “‘Murky’ protectionism and behind-the-border barriers:How big an issue? The €100 billion question”, VoxEU.org, 23 March.4. Evenett, S., Wermelinger, M. (2010), “A snapshot of contemporary protectionism: Howimportant are the murkier forms of trade discrimination?” In: Rising non-tariffprotectionism and crisis recovery: Studies in trade and investment, United NationsEconomic and Social Commission for Asia and the Pacific (ESCAP), Ch.1, pp.


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