Saturday, May 24, 2014

Protectionism, is It Okay?

            Japan is not a big country in East Asia but have a great economy as the report said that the growth of Japan’s economy is one of ten largest world economy. Actually, after World War II Japan had a rapid growth manufactures and economy things like the industrial that moved quickly to adopt new world development in only 30 years. It was very great movement for Japan instead of being consumptive to USA products in households, automobiles and other machinery. The Japanese government supported manufactures with protectionist policy like tax and subsidies and also quotas. As Kenichi Otabe, Japanese trade negotiator, said that Japanese government encourages and protects those industries which it believes important for reasons of national policy. Even there is comparative advantage principles, Japan had chosen to be a self-sufficient and not depend on other country for products even now. So, Japan was a success example of protectionist policy in the first post-war and so on.
            As we already know that protectionism is a government intervenes that restricts trading between countries. Learn from Japan, protectionism policy tries to protect market and the impacts on customers, domestic industrial as producer, and also the labor. In the process of being leader, Japan limited the imports quotas and only allowing foreign investments in technology which made Japan products more technologies to be export right now and the most exporter country in technology.
            Even though Adam Smith conveyed in 18th century that to keep the market going well people had to be free in economy without government intervenes, but as the world goes on that principle cannot be acceptable right now for many reasons. The most point is presented by John Maynard Keynes in 1926 that people can’t rely the hard situations like recession and depressions which is nationally case and to protect the market stable we need some wise policy then. So, for good stability in national economy some ways lay on protectionist policy. The forms of protectionism itself lay on tariffs, quotas, and also regulatory barriers. Tariffs policy is shape on tax and subsidies. Tax and subsidies are link to each other because subsidies itself is the revenue of tax on products. The tax given is to shift income from gainers to losers as we know in economy there always zero-sum game. Government intervention in quotas is a restriction policy to production quantity and also has different tariffs in each goods. Different from the others, regulatory barriers tends to escalate the quality and there are no tariffs in this regulation.
            Unfortunately, this restriction policy is limiting trade between countries, but not only that the protectionism itself could maintains the economic stability as I mentioned about Japan before and also not only Japan, China is one of successful economy because there is protectionism. Although every country right now apply that policy, protectionism is a must for country and every country should have own this policy but too much protectionism isn’t good because it could obstruct the foreign economy which reducing too much products in import. The economy should be maintains for good power because with great economy the power of country will rise ahead. In conclusion, the ultimate basis of these policies is an attitude towards economics that sees the economy not as an end in itself, but as an instrument of national power (Ian Fletcher).

Posted by,
Safira Damayanti

Helpman, Elhanan., Gainers and Losers in Understanding Global Trade, Ch. 3
Balaam, David N., “Laissez-Faire”: The Economic Liberal Perspective in Introduction to International Political Economy Fifth Edition, Ch. 4
Freiden and Lake, Protectionist Trade Policies, Ch. 19