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Finance Allah Shmoop What is protectionist This video is brought

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to you by our friends at Trojan Remember Trojan protection

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against sleepless nights A protectionist policy and essence tries to

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financially proto checked the businesses of the country while a

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protectionist policies one established by the local economy or country

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with the aim of financially protecting the businesses with in

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that country Example it is protectionist policy to charge fifty

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dollars a bottle import tax against French wines being imported

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into California where local Napa wine people have a tremendous

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lobby and for some strange reason are afraid of competing

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mano a mano or a rather bottle Oh bottle o

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We're local Napa people confident that their wine was a

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better product than that of the French Then they wouldn't

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bother pushing the government tohave taxes against them Damn foreigners

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exporting their swill Well this process sounds rational but in

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practice the game is oh so never simple For starters

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many countries actively back They're exporting companies in a weird

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kind of economic war called dumping which has nothing to

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do with either countries Bathroom habits The process of dumping

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usually involves high fixed costs high sunk costs in high

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capital expenditure industries Plus well then there's the manufacture of

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semiconductors Yeah such that a country with easy access to

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very cheap labor cheap capital and no regard to environmental

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pollution Well they can match with arsenic or gallium arsenide

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Onda silicon semiconductors at prices dramatically less than comparable builds

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in the United States with the hope of either corrupting

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those companies are essentially buying market share so that they

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become a major player around the world Will the competitive

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situation then demands all kinds of moral and ethical questions

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revolving around what the notion of quote fair unquote trade

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means Like you know when it's not about love and

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war Well the same friction gets laid in a protectionist

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policy where rather than imposing taxes are import duties from

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foreign distributors local countries place a quota on the quantity

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or volume of product allowed into the country From that

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interloper at the extreme end there's a complete embargo blocking

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all importing of that good strategically politicians aim protectionist policies

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domestic industries because in essence in the short run each

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goods sold to a foreign distributor exporting their products into

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the U S Takes away some value from a domestic

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taxpaying producer Right So if we bought all our cars

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from Japanese and Korean producers and bought none of them

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from American producers well all our dough would be shit

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doubt overseas right Well Additionally balance of trade then becomes

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an issue If the U S Could import a hundred

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percent of everything it uses at half the price at

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which it manufacturers that locally well life would be grand

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for Americans living large on the Macy's White Flower Day

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half off sale for about two quarters or a male

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maybe half a year right Think about it If you

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could buy that gap shirt instead of paying forty eight

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dollars for the rugby style thing you could buy it

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for twenty four dollars for the exact same shirt Well

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why wouldn't you after that our existing industries would essentially

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evaporate is meaningful economic entities and with no revenues coming

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to them from sales Well there'd be little money to

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send across our borders to buy things like oil and

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Japanese trucks Okay well adding yet more complexity to the

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notion of protectionism This black and white picture of importing

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and exporting one hundred percent of any given good is

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usually incomplete That is Mercedes makes its engines in Germany

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but stamps its bodies in the U S While using

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tires from Korea France and Japan and windshield wipers and

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other accessories from other manufacturers in nonunion red states in

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America and from Latin America They're all assembled in North

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Carolina So how do you even begin to calculate what

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a protectionist policy would do in this very cloudy vague

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sense of who owns what who benefits from what where

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and how much protectionist policy would do to help her

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harm the global balance the power The broader goal here

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and general notion is that the world receives a quote

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peace dividend unquote when company's heir not at war in

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this unhealthy way consumer's benefit when companies simply compete to

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deliver higher and higher quality product for incrementally better value

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to the end user If protectionism gets in the way

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of that liquid flow of Darwinian economic competition well it

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just adds friction where it really isn't needed And it's

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simply inefficient So to recap protectionism stopping the flow bad

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but the's thing stopping the flow good

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