Benefits and impacts of buying local products

¶ … Prelude

Buy local is a term which has diversified interpretations. According to one research, the term is applicable to locally run companies. Governments deem the term, Buy local, as a geographical factor. The critics say that corporations have toyed with the term as for them its local washing (Milchen, 2014).

Local purchasing is the tendency to buy locally produced products over high quality international products. The practice is beneficial for locally based industries. It is sometimes referred to as buying local, which is similar to the phrase think globally, act locally. Speaking nationally, the exact opposite of buying local is import exchange. In layman words, it means an industrial policy / agricultural policy, which promotes internationally-produced products over locally-produced items (Forge, 2013).

There are too many enticements to purchase from the local market. Hence with present market circumstances, people are willing to pay some extra costs entailing inspection, transport, packaging and retail facilities etc. For them it is a better option to have a trusted product rather going through trial and error process. The trend is usually towards international products. The international products have been tried and tested and have gathered considerable popularity amid their buyers abroad. They come with trust and brand recognition as opposed to local products who need to reach out and create awareness advertising campaigns in order to gain customer attention and induce intention to buy and actual purchase (Forge, 2013).

So it's pretty obvious that a person needs to take some serious action in order to buy local products. The local economy thinks that market dynamics are a byproduct of externalized price tags. These externalized costs include increasing asthma rates amid local population due to industrial waste, price hike due to wars and climatic changes which typically aren't factored in price of shipments. The advocates have voiced investment, purchasing and contracting to benefit local economy (Forge, 2013).

The economic theorists think that some myths exist in case of local buying. The concept of local buying has been under severe criticism by these theorists. They debate over transportation as it costs fraction of the final price of a product while selecting incompetent local products over competent foreign products is a sure fire deadweight loss. Some among them contend that shipment costs alone are just a fraction of the cost of overall production. The entire community isn't able to save money as clients have bought the competent products due to good quality. Hence they cap the argument saying that buying local essentially means protection in sugar coated terms. It's not exactly very beneficial to the local population (Forge, 2013). All in all, local buying according to these theorists is another name for protectionism which doesn't provide advantage to local community as their supporters believe. In any case otherwise, the money accumulated from international product purchase is usually sent abroad. Hence the community doesn't save money on the whole.

Apart from that, local organic local foods are pricey and quite irritating for the budgeted clients. Local producing farmers aren't assisted by government subsidies and can't compete with industrialized food producing companies. Hence they step up their prices. Apart from that, the local population will need to invest in locally owned businesses to drive down costs, since grocery shops are selling same products at a similar rate. Apart from that, transportation costs will need to be taken in consideration as well because it's pricey to buy a product from other areas (Forge, 2013).

Now the argument moves towards eliminating the foreign competition which has so deeply sunk its teeth into local marketplace that it's not possible to drive it back. Globalization has one merit of making products available which aren't available in other seasons. That is the merit of global trading. Global scale trade is necessary to fill the void in this modern era. If the consumer demand remains in equilibrium with steady government support then, food trade is certainly a beneficial form of trade in its essence (Forge, 2013). For this paper, the writer positions his arguments against local buying and the rest of the paper gives strong evidence and reasons to not support local buying movements of any kind.

Arguments against local buying

During the last ten years, governments around the world have been contemplating that protectionism and free trade policies are counterproductive for local producers and consumers. By protectionism they mean a shield, governments around the world, provide to their local companies which can't tackle the big guns (foreign competition) in terms of design, quality and efficiency. These companies also lack in sufficient capital to compete with their international rivals. Therefore, tariffs as well as other tools are made use of in order to protect these local companies from being driven to the ground and getting bankrupt (Irwin, 2011).

The basic idea is to promote free trade is making the market-based economic system more dynamic and driving global efficacy, which everyone (at the international stage) benefits from. The local labor unions have strongly voiced their aggravation towards exploiting the domestic workers with low wages saying that it affects the quality of not only products but also design and efficacy. Violating their rights cannot be tolerated as such companies acquire competitive advantage. Their efforts have bit dust as of yet with no actions taken in this regard (Irwin, 2011).

Unions have emphasized that global competitive advantage has no relation with low wages of its workers. It doesn't affect their design, quality and efficiency. Companies acquire competitive advantage regardless of high / low wages and its competitor's competence. The companies use similar processes of production as they branch out in various nations. Hence productivity of labors is similar while wages in third world nations are dirt cheap. Hence, paying mediocre wages doesn't change their competence levels / quality production (Irwin, 2011).

Now coming back to the protectionism and free trade, some arguments must be taken in consideration. When people buy international products, the country keeps importing it and the money is taken by the international company. When products are produced by local companies then people buy it averting further imports and the money generated remains within a country (Hess, 2009).

Hence, the money paid for imports must be balanced by export payments. Local purchasing is beneficial for any nation. Local producers must have access to local marketplace. By averting importing activity more job openings are created. Local purchasing is somewhat called moral buying. Local purchasing is beneficial for both community and industry. Jobs are created with local purchasing and wealth is accumulated. The community gets richer and nation becomes resilient (Hess, 2009).

The delusion in this discussion is clear from the fact that changes in imports to local manufacture are counterbalanced by exporting products. An importing industry will need to raise its output by demanding resources from a steady export industry. The third dispute hints at ending trade between countries (Hess, 2009).

The argument is completely baseless as support for protection is clear in America. The main concern here is that manufacturers have different prices for one product. So while protecting the local industries from foreign competition, there must be a way to balance off the competitive foreign producers as well as least competent local producers with a tariff (Hess, 2009).

The fourth dispute is that of new industries with a nice comparative advantage. New firms can commence work inside a country when it's offered some protection from the foreign competition. When competitive advantage is built and ready, protection would be waived off to commence free trade. Protection is a shield given to local manufacturer to elevate their competitiveness, marketing and management (Hess, 2009).

The governments have to sometime recognize some industries as infant industry protection. This volatile protection becomes a long-term shield. After a company secures protection, then the industry doesn't want to waive it off even though it's quite competent now. Direct subsidy is one way to promote the industry. These subsidies aren't liable to be in permanent protection, as they need yearly approximations from the concerned government. Direct subsidies cost less to a country and quite precise in comparison to import restriction (Hess, 2009).

The fifth dispute is deeply rooted in the national security segment based on structure of a country (military or political); it stipulates that a country is in a sensitive position during war as it relies on outside sources for information / supply. The main concern lies in outlining the demands of national defense. Securing the strategic industries doesn't make a difference (Hess, 2009).

In conclusion, there are still two disputes, one concerning the antidumping while the other is known as reciprocity. The first term means selling a commodity in another state at a lesser price than in the exporting country. Throwing away or dumping is both beneficial and dangerous for an importing state. It is beneficial when the importing country doesn't have a particular industry of a product while it's dangerous for putting a particular industry out of business by importing that product. The governments are often confused between predatory and permanent dumping. The exporters are usually successful in securing permanent protection (Hess, 2009).

Coming back to reciprocity dispute means supporting open and free trade. It means essentially that America is a broad minded market which invites importing than other states. The aim of the reciprocity is to keep in touch with exterior markets (Hess, 2009).

Whilst application many nations will counter this action meanwhile greater security is attained. There are a number of problems with reciprocity, for example slapping new tariffs on states that can't fulfill the equal access requirement would counter which results in American exporters being shutoff due to antagonism due to entry of an outside competitor. In any case otherwise, the main line of attack is to stonewall the imports downright as well as excessive government grants, which usually results in below quality products. From all arguments, the benefits of global trades can be shortened as (Hess, 2009):

Due to specialization, product gain is achieved as well as trade broadens the size of a market. The outputs are amazing at amazingly lower costs. According to comparative advantage, a nation should sell products which is being produced in excessive quantities meanwhile importing that is deficient in. even in case where it can't produce much products (it's at a disadvantage).

Elevating productivity

Elevating consumption level from global trade with free trade

Beneficial to customers with less prices and more variety of products

Free trade sinks deep teeth into local business and monopolies

Absolute advantage occurs in a case when a nation has a certain monopoly on a particular product manufacture and exports it more than other nations

Other benefits / gains

The price of products in the global markets

Taking the local monopolies to cleaners

Technology voids (one nation remains ahead of the competition due to superior technology)

Although the global trade is beneficial for all, countries should confine the trade Protectionism. But trading has multiple advantages as well. There isn't a country which can produce all sorts of products. Countries are interdependent on each other. The primary focus of a trade is to fulfill each other needs by producing a product in excess and exporting it while importing necessary products in return maintaining friendly ties (Hess, 2009).

Globalization is not a new concept by any means which influences both first world and third world countries for that matter. Its definition varies by the way. Globalization means a rise in trading activities, particularly free trade which is supposed to take place for some years. Free trade propels the developing countries into prosperity. The main question here is if whether globalization is prone to shape winners and losers causing instability in a world. United Nations Development Program (an agency of United Nations) states that poverty is increasing steadily in third world countries in its reports (Shuman, 1998).

According to the UNDP report released in 1999, the agency compared the ratio of salary of people living in richest countries to poverty stricken people living in third world countries. The ratio is:

30:1 in 1960

60:1 in 1990

72:1 in 1997

According to the report, poverty is winning in poor states while rich people are getting rich.

Some myths exists pertaining comparative advantage as well as free trade which nations should tackle aptly so as to address the future growth of its population: