fredag 25 januari 2008

Trade protection does nothing but harm

Protectionism is a benefit only to sectional interests, paid for by taxpayers and consumers. Where the protection applies to agricultural produce, the beneficiaries are not even farmers, but owners of farmland, as the higher prices for produce due to the reduced competition means that the farmers end up paying higher rents. Where the protection applies to manufactured goods, the resulting lack of competition means that over-priced and poor quality products are imposed on the unfortunate public in the "protecting" country. The EU's agricultural policies are a blatant example of how taxpayers and consumers have been exploited for decades; food is over-priced, to the benefit of owners of agricultural land. In other words, nearly everyone loses from protectionism.

Retaliation is pointless, since its main effect is to harm those in the countries that retaliate. It is obviously difficult for producers if developed countries "dump" their surpluses in third world countries, but it is real wealth that is being given away to them and it is up to them to work out how to make the best of these gifts.

The reduced exposure to external markets means that the manufacturing industries in the protecting countries have less incentive to improve and develop their products to the stage that they might become desirable exports. And conversely, restrictions on imports deprive consumers of their choice of price and quality. This ultimately debilitates the economies of the protectionist countries.

To retaliate is the logic of the madhouse, as if to say, "you have shot yourself in the foot so I will chop off my hands".

We are all consumers. We all want the opportunity for access to the goods that we want, at the best price we can obtain them for in relation to the quality. But as producers, we are divided into sectional interest groups. Any government that favours one group over others through protectionist policies is dividing their nation and promoting conflict.

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