Protectionism - why not?

[mace]

Correct

If an industry by it's self cannot compete, sure (generally due to unions forcing wages to high)

But if it cannot compete because of local taxation, regulation, H&S laws (all of which not only raise cost of doing business but also raise cost of living of the workforce, which demands wages increase) then the problem is not the industry made it's self uncompetitive but rather the government did

It's the number one problem with the "global economy", companies and workers are not on equal footing because of the differences between governments, taxation and laws. And in that imbalance it will be the companies that cannot offshore and the local people of the richer country's that lose out. While shareholders of companies that offshore and workers in poorer country's gain

Higher taxes will prevent us from acquiring jobs if another country which is equally as productive has a lower tax regime. Ireland being a good recent example of this.

[DimPrawn]

While shareholders of companies that offshore and workers in poorer country's gain

This is why it is a good idea to invest your money in shares in Indian outsourcing companies as a hedge.

If the Indian outsourcing companies do well, you make money but lose your job, if it all bombs, you lose you money but keep your job.

A nice hedge against Globalisation.

[Jet Setter]

Economies the size of the US can at least for the time being have the best of both worlds. I've seen the Aussie government enter an FTA that is almost entirely one sided to benefit the yanks.

Western economies will still survive with high standards of living with things the way they are. The problem with stronger economies like the US or even the UK being protectionist is that it doesn't allow weaker economies ie:African ones help trade themselves out of poverty and consigns them to hand outs. Please note: I am aware that massive corruption and lack of infrastructure are also a major reason for poverty in that part of the world.

[PM-Junkie]

I'm sure I'm going to get flamed on here, by "I'm alright Jack" types who are happy buying asparagus in December and cheap dvds, regardless of the millions of unemployed.

I reckon we should bring back our factories and coal mines and put hefty import duties on imports. Yes, manufactured imports will therefore be more expensive. I reckon it's a price worth paying.

Discuss (and destroy)

Wishful thinking I'm afraid....protectionism has never worked in the past, and it certainly won't work in circumstances where an economy is as fragile as ours. All you do is move the pain from one industry to another - you don't actually remove them pain, and usually you just make things a lot worse.

Academics use the example of the US steel industry & car making industry as the classic example.

30% steel tariffs were imposed by the US in an attempt to save jobs in the steel industry. However within 12 months, American companies that buy steel were jumping up and down because they were suffering from higher costs. Carmakers in particular were really peed off at the tariffs, because they came at a time of crisis for the industry when it could ill afford to pay extra for homemade steel. It's just one of the reasons they are in so much trouble now.

Although there were some gains for steel producing areas, overall the effect on the US economy was been a loss to GDP of at least $30m a year (according to the independant ITC). Their report also suggested that between 20,000 and 40,000 car job losses could be attributed to the steel tariff.

It's just one example of the macroeconomic consequences of protectionism. Simply put, if you try to pass policies that “save” jobs for one industry you set in motion losses in other related industries. If you try to raise tariffs on steel, you hurt car manufacturers and builders, forcing them to pay higher costs and lay off workers. If you introduce textile tariffs, you raise prices for clothing, a burden that naturally falls disproportionately on those who can least afford increases in prices. Plus if you intruduce tariffs, so does everyone else, and the things you have to import whether you like it or not become more expensive.

Protectionism is one of the big reasons that the recession in the 1930's became a depression. It simply doesn't work, and just serves to make things a lot worse.

Thankfully that is one lesson that seems to have been learned.

[sasguru]

This is why it is a good idea to invest your money in shares in Indian outsourcing companies as a hedge.

If the Indian outsourcing companies do well, you make money but lose your job, if it all bombs, you lose you money but keep your job.

A nice hedge against Globalisation.

All this BS you post only serves to confirm your Walter Mitty status.

[sasguru]

Bottom line is the West cannot justify its higher standard of living in economic terms any more as it doesn't do things any better than the East (apart from in some sectors e.g. aerospace, pharma and some countries like Germany that trade on their perceived quality).

[DimPrawn]

All this BS you post only serves to confirm your Walter Mitty status.

Actually no. It's easy to get exposure to the top outsourcing companies (and pharma, telecoms, etc) via a managed fund (e.g. Jupiter India).

Win, win.

[Peoplesoft bloke]

Whilst I accept Protectionism can't work, there are parts of the free market that just seem insane. The most recent example was the workers in Scotland fired because it's cheaper to send Scottish prawns to Thailand for processing and then return them here. It may be cheaper but it's an insane use of resources.

[Cyberman]

Whilst I accept Protectionism can't work, there are parts of the free market that just seem insane. The most recent example was the workers in Scotland fired because it's cheaper to send Scottish prawns to Thailand for processing and then return them here. It may be cheaper but it's an insane use of resources.

.. but you were probably amonst those that advocated the minimum wage. Hypocrite perhaps ?

[MrMark]

Whilst I accept Protectionism can't work, there are parts of the free market that just seem insane. The most recent example was the workers in Scotland fired because it's cheaper to send Scottish prawns to Thailand for processing and then return them here. It may be cheaper but it's an insane use of resources.

Import duties would have prevented this. You see - Protecting our industry keeps prawn processors here in work AND protects the planet!