What Are the Arguments for and Against Open Markets and Free-Trade Policies?
Finally, some conclusions will be drawn as to which evaluation has a stronger point. Free trade is built on the principle that if more people are freely available to engage in mutually beneficial exchange, that this will mean the world resources are used more efficiently, more people will become wealthy as a result.
Thus, if a country has expensive products because of labour cost, the domestic firms will lose market share to foreign firms. Fifth, some governments argue that protectionist laws enhance equality in income through protection of local jobs. These are the essence of high tariffs and subsidies for the domestic firms. From this argument, one can deduce that the US, which has an expensive steel industry, may not compete against the steel industry of Brazil, which is relative cheap. In such situations, the US steel industry may lay off workers in order to cut costs and remain competitive. Consequently, workers who depend on the industry will slip into poverty. From such competition, the steel industry in the US may collapse altogether after several years. Consequently, the US will rely on foreign suppliers of steel. If the US engages in diplomatic disputes or wars with Brazil or other countries with steel firms, it may not be able to get that vital resource for its domestic operation. Thus, the result could be devastating to the US economy.
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