FREE ESSAY ON SHOULD AMERICA PROTECT INDUSTRIES FROM FOREIGN COMETITION

SHOULD AMERICA PROTECT INDUSTRIES FROM FOREIGN COMETITION

Should America Protect Industries from Foreign Competition 
Many politicians oppose free international trade, trade without any restrictions, for a
couple of reasons. From their point of view it would affect the United States in a couple
of ways:
1. Many USA workers would lose their jobs because factories would be moved to the country
with whom the U.S. has a Free Trade Agreement, and where working force is much cheaper. 
2. Importing foreign goods and services without tariff into the United States makes it
harder for domestic industries to compete with lower prices and better quality of foreign
competition. 
3. Some politicians feel that it is not the right decision to have open trade with
countries where the workforce is forced to work and where prisoners are used as workers.
Because of these reasons, politicians who oppose Free Trade, feel that the U.S. should
have some kind of restrictions, such as protective tariffs, import quotas, non tariff
barriers, and/or export subsidies. However, some politicians and economists feel
differently. They say that if some country would raise its barriers in order to reduce
imports and stimulate production, the country whose exports suffer may raise its
barriers, too. This would cause a trade war. The trade war would effect every nation in
lower output, income, and employment; example is the Smooth-Hawley Tariff Act of 1930.
The United States is enjoying its second longest period of sustained economic expansion
with real GDP growth averaging over 2.8% during the years 1992-96 and accelerating to
3.9% in 1997-98. The United States' strong economic performance is due in part by trade
and investment liberalization resulting from the Uruguay Agreement and the North America
Free Trade Agreement (NAFTA). The openness and freedom of the economy has contributed to
improving the competitiveness of the U.S. producers, creating more and better paid jobs,
which in turn raised labor standards and reduced poverty. At the end of 1998 the
unemployment rate fell to 4.5% and consumer price inflation to 1.6%, which is the lowest
level since the 1960. This outstanding macroeconomic performance has been greatly
followed by a large and growing current account deficit, which in 1998 reached a record
level of $223 billion (2.7% of GDP). The trade deficit has enabled the U.S. economy to
keep up with its strong rate of growth. 
Open economy brings imports, which are often at a lower price, and they help to satisfy
domestic demand. They have also contributed to lower domestic prices and wider choice for
the U.S. consumers. The U.S. producers have benefited from lower costs and wider choice
of input, too. It increased their competitiveness, resulting in more jobs and higher
wages. Imports have helped with inflation pressure that might otherwise have emerged as a
result of the very strong growth of domestic demand and low unemployment rate, thereby
supporting low market interest rates. 
An additional source of funds for domestic investment flow from abroad. Foreign investors
made up the shortfall of national savings relative to domestic investment. Foreign
investment has enabled the U.S. economy to grow faster then would have been the case if
it were relied solely on domestic saving. Foreign investments have also contributed to
the recent market improvement in labor productivity. As a result, average living
standards in the United States, as measured by per capita GNP, are at $28,740, among the
highest in the world. 
Countries that remain closed, remain poorer, underdeveloped, cut off from the world of
rights and freedom. This poverty, not trade, is the main cause of bad working conditions,
and it must be met by expanding commerce, not imposing sanctions. If the U.S. wants to
help those nations where working conditions are poor, the U.S. should open more to them.
A perfect example is China. Some politicians, as I said in the beginning, oppose trade
with China because of workers' conditions, not realizing that it is due to keeping them
closed. When the federal government closes U.S. markets to countries with governments
that deny their citizens certain civil rights, it robs those citizens of one more freedom
and closes the market that is the best instrument for creating wealth and preserving
freedom. 
In conclusion I would like to say that the U.S. economy has had outstanding growth and
productivity performance during the period of 30 years, accompanied by the lowest levels
of unemployment and inflation. This suggests that trade and investment liberalization
support strong economic performance. Any major upsurge could cause smaller profit
expectation and reduce the attractiveness of the United States to foreign investors,
thereby possibly prompting a major correction of the U.S. stock market. Such a correction
could reduce consumption - possibly reversing the recent decline in personal saving-and
imports, thus perhaps jeopardizing the still fragile recovery of countries most effected
by the financial crisis, which erupted in 1997.