Free Trade For Everyone

          The world economy is a complex system which is difficult to predict and thus hard to control. Governments have many forms of trying to control trade such as tariffs, quotas (and zero-quotas or bans), subsidies and fixing exchange rates. They can also create extreme technical or health standards for imports or even transportation. These measures are in place to limit the reliance on other countries as well as a fear of losing the agricultural industry in developed countries which would put them at a military disadvantage. Thought no countries have truly free trade, it would be to everyones benefit to do so. If every nation had completely free trade they would maximize comparative and absolute advantages as well as efficiency by specializing completely. There would be a risk as each country would be entirely dependent on other for products as well as being very susceptible to the market fluctuations of their own product. However protectionism has an even higher cost as the consumer is always at a lesser advantage. In a free market economy, the consumer would have increased buying power after the destruction of other industries and the creation of the specialized industry. Ultimately the entire world economy would benefit as would the world populations since products would be as cheap as possible. However the fear of dependency as well as the social cost of cutting jobs to create specialization prevent this from happening despite the positives.

     The perfect example of how protectionism can ruin an economy comes from Argentina. They have rampant tariffs, placed hundreds of products on waiting lists where they must wait for up to 60 days before entering the country, manipulated the exchange rates and imposing trade licenses to over 600 industries who wish to bring products in. Argentina has clamped down on its borders to attempt to jump start its domestic production. The result has been devastating as the economy has plummeted and even worse the rest of the world has turned their backs on them, including a recent ruling by the WTO that these sanctions breach global trade rules. While Argentina will dispute these charges, it is without a doubt that they have ultimately failed and their protectionism has done much more harm than good. While other factors have contributed, the facts remain that Argentina has imploded its own economy and now has no one to turn to for help. They have defaulted on their debt and investors have lost faith in the once powerful and rich nation. We should learn from their mistakes and move away from the potential harms of protectionism and open the borders to free trade for the benefit of all.

Sources:
Lecture slides

http://www.internationalfinancemagazine.com/article/WTO-rules-against-Argentinas-protectionism.html

http://knowledge.wharton.upenn.edu/article/the-risks-and-rewards-of-argentinas-growing-protectionism/