Protectionism
This definition is brought to you by our friends at Trojan. Remember: Trojan…Protection against sleepless nights.
A Protectionist policy is one established by the local economy with the aim of financially protecting the businesses of the country.
Example:
It's Protectionist policy to charge $50 a bottle import tax against French wines being brought into California, where the local Napa wine people have a tremendous lobby, and for some strange reason, are afraid of competing mano-a-mano, or rather, bottleo-a-bottleo, with the French. Were the local Napa people confident that their wine was a better product than that of the French, then they wouldn’t bother pushing the government to have taxes against them darn foreigners, exportin’ their swill.
This process sounds rational, but in practice, the game is never so simple. For starters, many countries actively back their exporting companies in a weird kind of economic war called dumping, which has nothing to do with either country’s bathroom habits. The process of dumping usually involves high fixed costs, high sunk cost, high capitalist expenditure industries, plus the manufacture of semiconductors, such that a country with easy access to very cheap labor, cheap capital, and no regard to environmental pollution...can etch with arsenic or gallium arsenide onto silicon semiconductors at prices dramatically less than comparable builds in the United States, with the hope of either corrupting those companies, or essentially buying market share so that they become a major player around the world.
This competitive situation, then, demands all kinds of moral and ethical questions revolving around what the notion of “fair” means...when it’s not about love or war.
The same friction gets laid in a Protectionist policy, where, rather than imposing taxes or import duties from foreign distributors, local countries place a quota on the quantity or volume of product allowed into the country from that interloper. At the extreme end, a complete embargo blocks all importing of that good. Strategically, politicians aim protectionist policies at domestic industry jobs because, in essence, in the short-run, each good sold to a foreign distributor exporting their product into the U.S. takes away at least some value of a domestic equivalent product.
Additionally, balance of trade becomes an issue. If the U.S. could import 100% of everything it uses, at half the price at which it manufactures it locally, life would be grand for Americans living large on the Macy’s White Flower Day Half-Off Sale for about two quarters, or half a year. After that, our existing industries would essentially evaporate as meaningful economic entities, and with no revenues coming to them from sales, there would be little money to send across our borders to buy things like oil and Japanese trucks and wind-powered jetpacks.
Adding yet more complexity to the notion of protectionism, this black and white picture of importing and/or exporting 100% of any given good is usually incomplete. That is, Mercedes makes its engines in Germany, but stamps its bodies in the U.S., while using tires from Korea, France, and Japan. And windshield wipers and other accessories from other manufacturers in non-union red states in America. They’re all assembled in North Carolina. So how do you even begin to calculate what a Protectionist policy would do in this very cloudy, vague sense of who owns what and where, and how much protectionist policy would do to help or harm the global balance of power?
The broader notion here is that the world receives a “peace dividend” when companies are not at war in this unhealthy way. Consumers benefit when companies simply compete to deliver higher and higher quality product for incrementally better value to the end user. If Protectionism gets in the way of that liquid flow of Darwinian economic competition, it just adds friction where it isn’t needed.
Related or Semi-related Video
![Finance: What is Protectionist?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.983_770x433.jpg)
Finance: What is Protectionist?5 Views
Finance Allah Shmoop What is protectionist This video is brought
to you by our friends at Trojan Remember Trojan protection
against sleepless nights A protectionist policy and essence tries to
financially proto checked the businesses of the country while a
protectionist policies one established by the local economy or country
with the aim of financially protecting the businesses with in
that country Example it is protectionist policy to charge fifty
dollars a bottle import tax against French wines being imported
into California where local Napa wine people have a tremendous
lobby and for some strange reason are afraid of competing
mano a mano or a rather bottle Oh bottle o
We're local Napa people confident that their wine was a
better product than that of the French Then they wouldn't
bother pushing the government tohave taxes against them Damn foreigners
exporting their swill Well this process sounds rational but in
practice the game is oh so never simple For starters
many countries actively back They're exporting companies in a weird
kind of economic war called dumping which has nothing to
do with either countries Bathroom habits The process of dumping
usually involves high fixed costs high sunk costs in high
capital expenditure industries Plus well then there's the manufacture of
semiconductors Yeah such that a country with easy access to
very cheap labor cheap capital and no regard to environmental
pollution Well they can match with arsenic or gallium arsenide
Onda silicon semiconductors at prices dramatically less than comparable builds
in the United States with the hope of either corrupting
those companies are essentially buying market share so that they
become a major player around the world Will the competitive
situation then demands all kinds of moral and ethical questions
revolving around what the notion of quote fair unquote trade
means Like you know when it's not about love and
war Well the same friction gets laid in a protectionist
policy where rather than imposing taxes are import duties from
foreign distributors local countries place a quota on the quantity
or volume of product allowed into the country From that
interloper at the extreme end there's a complete embargo blocking
all importing of that good strategically politicians aim protectionist policies
domestic industries because in essence in the short run each
goods sold to a foreign distributor exporting their products into
the U S Takes away some value from a domestic
taxpaying producer Right So if we bought all our cars
from Japanese and Korean producers and bought none of them
from American producers well all our dough would be shit
doubt overseas right Well Additionally balance of trade then becomes
an issue If the U S Could import a hundred
percent of everything it uses at half the price at
which it manufacturers that locally well life would be grand
for Americans living large on the Macy's White Flower Day
half off sale for about two quarters or a male
maybe half a year right Think about it If you
could buy that gap shirt instead of paying forty eight
dollars for the rugby style thing you could buy it
for twenty four dollars for the exact same shirt Well
why wouldn't you after that our existing industries would essentially
evaporate is meaningful economic entities and with no revenues coming
to them from sales Well there'd be little money to
send across our borders to buy things like oil and
Japanese trucks Okay well adding yet more complexity to the
notion of protectionism This black and white picture of importing
and exporting one hundred percent of any given good is
usually incomplete That is Mercedes makes its engines in Germany
but stamps its bodies in the U S While using
tires from Korea France and Japan and windshield wipers and
other accessories from other manufacturers in nonunion red states in
America and from Latin America They're all assembled in North
Carolina So how do you even begin to calculate what
a protectionist policy would do in this very cloudy vague
sense of who owns what who benefits from what where
and how much protectionist policy would do to help her
harm the global balance the power The broader goal here
and general notion is that the world receives a quote
peace dividend unquote when company's heir not at war in
this unhealthy way consumer's benefit when companies simply compete to
deliver higher and higher quality product for incrementally better value
to the end user If protectionism gets in the way
of that liquid flow of Darwinian economic competition well it
just adds friction where it really isn't needed And it's
simply inefficient So to recap protectionism stopping the flow bad
but the's thing stopping the flow good