Free Trade vs. Protectionism: Pros, Cons, and Balance

Introduction

There are many arguments both for and against free trade and protectionism. Some contend that free trade should rule the day and that the market can regulate itself. Others suggest that the market is an immoral system and that countries should be permitted to protect their national and economic interests when necessary. This paper discusses the pros and cons of each position and offers an overall opinion. While free trade is generally the better course of action, there are times and situations where at least some elements of protectionism are not beyond the pale.

Defining Free Trade and Protectionism

Generally speaking, free trade occurs when commerce is allowed to happen in an unfettered way. Rather than goods being blocked from crossing borders in the form of exports or imports, free trade is about letting people sell what they wish across borders without penalty or bans on items that are generally legal and unrestricted when traded domestically. On the other end of the spectrum is protectionism. While many economists and pro-trade advocates view this as a "bad word," there are times and situations where protectionism is not necessarily a bad thing — and may even be necessary or advisable. Indeed, many argue that free trade, for all of its benefits, tends to carry hidden or obscured harms for people who are simply trying to get by.

The primary reason protectionism is employed is to protect national jobs and industries. For example, an oil-producing nation will often impose heavy restrictions on oil imports in order to protect local suppliers. A common side effect — and a central complaint about protectionism — is that limiting supply tends to keep prices higher than they would otherwise be under open competition. However, critics of free trade frequently invoke the term "race to the bottom," arguing that many poorer and developing countries will accept low-paying jobs simply to attract foreign investment, which may ultimately hurt these nations in the long run. Beyond that, economies that are heavily dependent on exports often struggle and suffer greatly when global economic conditions deteriorate (Bartlett, 2016; Chmielewski, 2016).

Key Arguments For and Against Each Approach

As with many policy debates, the two positions presented here represent opposite ends of the same spectrum. The complexity of the situation means that neither extreme alone is adequate, since no single solution will resolve all concerns. There needs to be a sliding scale, and the proper equilibrium between free trade and protectionism should lie somewhere between the two extremes.

That said, limiting trade is generally not a good idea, as it tends to raise prices and stifle economic growth. Conversely, free trade can lead to unintended consequences, including those described above. It is a valid concern to want a local or national economy to be as self-sustaining and independent as possible. At the same time, exports are a powerful way for a country, its businesses, and its citizens to generate wealth. The best answer, therefore, is to allow free trade as broadly as possible while simultaneously developing and protecting local and national interests wherever feasible.

Finding the Right Balance

There is no question that the world is getting smaller when it comes to trade, communication, the internet, and beyond. It will therefore serve countries well to embrace that trend rather than resist it. Closing off a country from the rest of the world in matters of trade is rarely a good idea. However, there are times and situations where protective measures are indeed the ethical course of action — such as when workers are enslaved or otherwise mistreated, or when trade proceeds are channeled toward terrorism and similar harms.

Bartlett, B. (2016). Free trade vs. protectionism: Why history matters. The Fiscal Times. Retrieved August 21, 2016, from

Conclusion

Chmielewski, T. (2016). Free trade vs. protectionism. Smallbusiness.chron.com. Retrieved August 21, 2016, from