International Trade Debate

Considering the aftermath of the global economic recession, most countries tend to protect their economies from adverse affects of globalization and economic integration and cooperation. The United States of America is not the exception. Considering that US dollar is the reserve currency for most countries, dollar is one of the most demanding currencies in the world. As the result, dollar is the major payment currency not only during US trade with foreign countries, but also during the trade among other countries. To protect the national producers and economy, US may impose tariffs and use quotas to restrict the foreign trade. The tariffs imposed on imported goods will increase the price of the goods at domestic markets. Firstly, the national producers benefit, as their profits increase due to higher prices. Secondly, the government benefit, as it collects higher tax revenues. Although imposing tariffs benefit national producers and increase the federal tax revenues, it usually adversely affects the exporting industries. In addition, the protectionism of national producers may also result in decreased quality of produced goods. In comparison to tariffs, which are taxes in nature, quotas are limits imposed on the amounts of imported goods. Domestic producers benefit by receiving higher prices. However, using quotas adversely affect the exporting industries, as well as welfare of consumers of domestic products, as they are forced to pay higher prices. As the result, the policy of protectionism is beneficial for domestic producers in terms of increased profits and decreased competition. However, such policy may be effective only for strategic industries, which are of vital importance for the economy. ReferencesSalvatore, D.(2005), Introduction to International Economics (First ed.), Hoboken, NJ: Wiley. Sullivan, A. Sheffrin, S.M. (2003). Economics: Principles in action. Upper Saddle River, New Jersey: Pearson Prentice …