Protectionism Versus Free Trade Essay Samples

Is Chindia a Friend or a Threat?

Nations create ties as a sign of camaraderie. Hence, organizations like the United Nations and the World Trade Organizations are formed. These organizations strengthen the bond that nations form and ensure that protocols are followed in the engagement of ties and bond between nations. However, there are often more to just mere camaraderie when nations affiliate among each other. For example, the United Nations was formed to ensure that nations will no longer engage in hostile situations that would succumb each to participate in war (United Nations Organization), while the World Trade Organization ensures to keep nations fully aware and compliant to the rules of trade (The World Trade Organization). In the case of the question relating to China and India’s position as a trading partner to nations, particularly the United States, it is questioned whether China and India’s current position and involvement in trade should be viewed as an advantage or a disadvantage. Considering the data presented in the book entitled International Business: Competing in the Global Market Place, the author presented the current condition and the hold that China and India have as far as trade is concern (Will). To respond to the inquiry as to whether Chindia, a colloquial term assigned for China and India, is a friend or a threat, the answer is both. The answer varies depending on what aspect the question is being directed.
China and India offer one of the cheapest labor forces in the market. In addition, the costs of resources from these countries are also cheap along with the other cost of production. In lieu with this, products manufactured in China and India are comparatively more affordable as compare to the amount of products manufactured and sold elsewhere. By the simple rule of economics, a low cost of production would necessarily result to a more competitive cost of end products. Hence, Chindia has the capacity to manufacture more given the proposed fund as compared with products produced in countries where everything usually comes with a heavy price tag. Based on this analogy, Chindia can be a friend among multinational manufacturing factories. It allows these companies to maximize their resource and assume a bigger profit. Nevertheless, there are instances when quality is compromised because of the desire to cut down on the cost of production.
Another explanation that can be given on this situation that might prove Chindia as a threat is China and India’s overproduction thereby creating surpluses that are sent to countries like the United States. Since there is an overproduction of goods in both China and India it will need to find a market that would accept their surplus or their excess in production. As a result this will flood a country like the United States with products coming from China and India. These products, however, are creating pressure and strong competition among local products in the hosting country where their excess in production are sent like the United States. Naturally, consumers would be looking for products that are comparatively cheaper that what is available. As mentioned earlier, most locally manufactured products especially in the United States are mostly very expenses because the cost of labor is higher and the cost of production is very high.
Given this scenario, consumers would very well prefer the products coming from China and India, which as a result would ruin the business for locally manufactured products. Hence, China can be seen both a friend and a threat.

Protectionism and free trade are both economic policies that are implemented the government to regulate trade in a specific country. Government decides wither protectionism or free trade depending on the condition that is prevailing in the market. It is necessary that the government becomes fully aware of the situation within their country particularly relating to how they interact and conduct trade among the other nations before imposing the type of economic policy. To differentiate the two, protectionism is an economic policy that restricts other nations from conducting trade with the host country. It is a trading restriction specifically implemented in international trade. It operates with the government imposing tariffs or trading restrictions to regulate the amount or quantity of imported products from entering the port and being sold in the local market (Wilkinson). On the other hand, free trade is an economic policy that welcomes foreign traders to enter the nation and conduct trading relations with a nation without running the risk of having to worry about quota, tariffs and other trading requirements (Krugman).
Protectionism is when a nation decided to limit the entry of imported products to the country in the guise that by doing so the government can actually protect the small and local businesses from losing to competition. In addition, this trading policy is also implemented by government in relation to forcing nations to give in to the hosting country’s conditions. Protectionism is believed to have similarities to merchantilism nd import substitution considerig that the nature of these principles is believed to foster a positive trade equilibrium. Many critics see the principle of protectionism as detrimental to the growth of the economy because the costs of implementing the different approaches of protectionism is bigger than its perceived reward. For example, imposing tarriffs on imported goods is believed to benefit domestic producers and manufacturers. However, closing one's door to trade it restricts the country's source of revenue to donestic taxation, which is not sufficient to sustain the nation's Gross Domestic Product (GDP).
On the other hand, free trade is encouraged when there is a limited supply of resources in the country or if a local product is creating a monopoly. It should be remembered that when monopoly exist, the prices of commodities tends to increase as well. Hence, the decision to bring more producers and suppliers into the market which in return would lower down the prices is a very effective economic strategy. Free trade also allows for competition which will create a a dynamic exchange of goods and resources. This will pressure manufacturers and producers to raise their quality and agree on a competitive price. This technique is proven effective by developing nations as it also creates political ties among nations who both participate and partake in the business.
Overall, it can be assumed that the decision to choose between protectionism and free trade varies among the variables that are currently working in the market. In addition, it should be reminded that in selecting the trading policy to implement, governments should consider not only the businesses but also the consumers availing the products.

Works Cited

Krugman, Paul. "Is Free Trade Passe?" The Journal of Economic Perspectives (1987): 131–144.
The World Trade Organization. About: World Trade Organization. 24 February 2015. 24 February 2015 <https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm>.
United Nations Organization. United Nations: At A Glance. 24 February 2015. 24 February 2015 <http://www.un.org/en/aboutun/index.shtml>.
Wilkinson, Richard. TED Video: How economic inequality harms societies . 23 July 2011. 28 April 2014 <http://www.ted.com/talks/richard_wilkinson>.
Will, Charles. International Business: Competing in the Global Market Place. New York: McGraw-Hill , 2013.