Choose one example of a real protectionist policy that has been

Choose one example of a real protectionist policy that has been Choose one example of a real protectionist policy that has been implemented by the government of some country and discuss the issues surrounding the policy – Essay Example Protectionist policy Protectionist policy is a policy that was set up with the main aim of protecting local domestic industries fromthe aggressive competition of other international industries that seemed to be well established by the use of waivers such as subsidies, tariffs, import quotas or any other restrictions that were placed on the goods imported from other foreign countries (Encyclopedia, 2013). This policy was first adopted by the congress of the United States of America back in 1789 despite their earlier opposition to it as practised by the British. They did this by adopting their first tariff which was aimed at raising revenue (Bartlett, 2013). Despite the Americans adopting the policy a few years after their independence, the tariffs were applied on many of their manufactured goods in the year 1824. The goods that experienced increased tariff rates were glass, lead, iron, hemp and wool. The protectionist policy reached it peak in the year 1828 when the new tariff referred to as Abomination was put in place (Bartlett, 2013). It was during the application of this Abomination tariff that the rates increased up to 49 per cent (Bartlett, 2013). The Americans continued using this policy even after the First World War whereby they argued that the use of high tariffs was necessary so as to be able to reduce the surplus of the treasury as well as to discourage imports. The republican had even passed the Payne-Aldrich tariff under President William Howard in 1909 (Bartlett, 2013). The protectionist policy has been set up and defended by governments of various nations by use of three key arguments. The first and most common reason among applying it claims that high tariffs, as well as subsidies is a way of protecting local jobs for the citizens in the domestic industries (Spruiell, 2006). The argument has been supported by the facts like; an American steel industry that is facing competition from a foreign company of Brazil will Be required to end contracts of the employees as a result of competition caused by cheap steel from Brazil (Spruiell, 2006). The act of laying off the employees will have negative impacts on their families. Another reason is that if the competition from a foreign company that is producing and exporting steel at a unusually low price will lead to the collapse of the local American Steel Company. The collapse of the company will result to the country like US to face double tragedy whereby all workers will lose their jobs   leaving the country with  only choice of having to depend on foreign company for the supply of steel (Edwards, 1991). This dependence on external supply of steel will also be a limitation with devastating effects on the US in case the country goes to war against other nations as it will be difficult to produce the country’s own resources (Spruiell, 2006).Also, this policy has been used as bargaining chip by many governments during various trade negotiation s  neighbouring countries due to the believe that  they have to be at par with each other (Spruiell, 2006). The protectionist policy benefits some industries at the expense of others. In the United States of America for instance, only powerful industries dealing in steels, agribusiness and Textile lobbies have been protected by the policy against completion from foreign companies while most of the other industries have not (Razin,1983). The policy has also saved jobs for the workers in the protected companies and helped those industries avoid financial catastrophe. It has also been useful during trade negotiations among countries (Spruiell, 2006). In case of the US increasing tariffs to protect domestic steel industry against cheap steel from Brazil, the Brazilian steel industry suffered negative impacts of protectionist policy as it affected the ready and reliable market for its steel in the America. The employees of the Brazilian company were not spared as the reduced sales resulted to them losing their jobs (Obstfeld, Maurice, 1982) Protectionist policy therefore,  has both advantages and disadvantages on the entire economy. The protected companies together with the workers enjoy the positive side of the policy while unprotected company faces risk of collapsing due to the foreign competition. Bartlett, B. (2013, March 24) The Truth about Trade in History. Retrieved March 24, 2013, from www.cato.org: cato.org/publications/commentary/truth-about-trade-history Encyclopedia, B. O. (2013, March 24). protectionism. Retrieved March 24, 2013, from www.britannica.com: britannica.com/EBchecked/topic/479643/protectionism Spruiell, S. (2006, August 30). Protectionism- Tariffs, Subsidies and Trade Policy. Retrieved March 24, 2013, from www.globalenvision.org: globalenvision.org/library/15/1211 Edwards,February 1991,Anticipated protectionist policies Retrieved March 24,2013,from www.ssrn.com Obstfeld,Maurice, 1982,Aggregate spending and terms:Is there Laursen-Metzler Effect?,The quarterly journal of Economics, MIT press, vol.97(2). Razin,1983, Trade taxes and Current account,Economics Letters,Elsevier,vol.13(1),pages 55-57