Protectionism

Report

Protectionism is the development of an economic policy to protect the country's own products, imposing limitations on the entry of foreign, similar or equal products through the imposition of tariffs and taxes on imports, thus making the product so expensive that it is not profitable .

The policy that governs protectionist expansion has seen different periods of boom and decline throughout history. In general, in situations of war economy or autarky, protectionism is clearly applied. In situations of economic crisis, certain levels of protection of the products themselves prevent a sudden drop in prices and the consequent downfall of some sector of the national economy.

Protectionist measures

If a country finally decides to apply protectionist measures to protect domestic companies, the most used measures to stop imports of products from other countries are the following:

1. Taxes on imports. A tariff is a customs tax on imports and has a dual purpose: to raise money for public coffers and to make foreign products more expensive to make them less competitive than domestic ones. Tariffs can be of two types:

- Specific: establish a fixed amount of money per physical unit imported regardless of the value of the imported merchandise. For example, 150 euros for each product X imported from the United States.

- Ad valorem: establishes a fixed proportional tax on the value of the merchandise. For example, 10% on the value of the good X imported from another country.

2. Establish trade and industrial policies that favor the development and expansion of national industries. The objective in this case would be to give rise to a situation in which domestic firms compete with foreign firms that do not benefit from any type of aid. This situation could be achieved, for example, by subsidizing certain sectors.

3. Set limited quotas or quotas of foreign products. What is done in this case is to establish limitations on the quantities that can be imported from certain goods. For example, a few years ago the European Union restricted the import of Japanese cars to a limited number of units per year.

4. Non-tariff barriers. The aim of these barriers is to put as many barriers as possible to imports, but not through taxes, but through measures such as: demanding compliance with high quality standards for imported products, special labeling, complex bureaucratic procedures , etc. The objective, once again, would be to make the domestic product more competitive vis-a-vis the foreigner.

As it could not be otherwise, the objective of these protectionist measures is none other than to protect domestic products against foreigners. But are these barriers to free competition ethical? Do they in any way benefit consumers

Trump repeats from before winning the elections that will review the free trade agreement of EE. UU. With Mexico and Canada, known as NAFTA, and will levy a tax on US companies that keep production in third countries like the southern neighbor.

This has caused problems for Mexico, such as the recent announcement by the US company Ford that it canceled an investment of US $ 1.6 billion to build a car plant in that country.

In addition, after the election of Trump, the Mexican peso has fallen historic lows against the dollar.

Despite his belief that ties between Washington and Latin America will be difficult to change, Obama anticipated in Lima that this would be one of the areas of possible north-south dispute.

"There will be tensions, probably around the trade more than anything," said the outgoing president in his last visit to Latin America before ending his term.

Trump's crack at Mexico's industry

Trump also said he will withdraw to the US. UU. Of the Trans-Pacific Agreement on Economic Cooperation, known by its acronym