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Protecting local goods and industries

Updated on July 22, 2013

PROTECTIONISM: An aid against the economic crisis?

The economic crisis needs no introduction. Economists and other experts are providing all types of analysis about how it occurred, what are its effects and what should be done by governments and entrepreneurs to combat the economic crisis.

However, for common people who are not well versed in economics and related subjects, those analysis may neither be well understood nor be helpful. Yet, we are all affected by the economic crisis and we can all help fighting it.

Simply speaking, the economic crisis is making our countries and people poorer. Industries are doing bad and are sacking workers. In many cases, families no longer have a bread earner.

Industries are failing mainly because they are unable to sell the goods they make. Either consumers are no longer buying the type of goods because they have to prioritise their purchases or simply because they can find imported substitutes cheaper. And it is here that it really hurts.

We have been moving towards a globalised world and we have been supporting trade liberalisation. We have been favouring cheaper imported goods at the expense of locally produced but more costly products. We have also been accepting that cheap labour be imported in order to cut down costs in our local industries so as to make our export competitive in the export market. Governments have been signing treaties so as not to impose non-tariff barriers to import at the expense of local industries.

Result: Many local factories closed down, many workers have become unemployed and poor families have been getting poorer.

What should be done?

I cannot provide any solution to governments. I am not competent in those matters. But I can certainly propose something that we, common people, can do in order to help our respective countries facing the economic crisis.

Let us protect our local industries. Let us consume locally manufactured goods. I admit that this would negatively impact on businesses involved in import and distribution but you will all agree that a manufacturing business employs more people than an importing business does.

Why should we protect our local industries?

- Our money remains in the country with less imports. This can help in compensating the reduction in export that resulted from the economic crisis. Your country does not get enough foreign currency from export but it would also import less. Else, it would have to borrow funds to meet the excess of import over exports, called the balance of trade deficit.

- We create demand for local products which invites for local investments. As such, we maintain existing employment and even create jobs for ourselves. So we help in the fight against unemployment. Lowering unemployment rate implies less social problems, less government expenditure on social aids and more funds that can be used more productively.

What about the theory of comparative advantage?

This is the questions that most economists will ask. This theory of comparative advantage was used in order to promote free trade. It affirms that countries will only produce and export those goods which they can produce more efficiently while import other goods.

However, it now seems that only a few Asian and Latin-American countries have a comparative advantage of producing most goods. Then what is left to be produced by the remaining countries? Does it not mean that most countries need to import most of their goods while they will have difficulties in exporting their products?

Protectionism, according to economics theories, is more a tool used by government. Yet, whether governments decide to use it or not, whether they are bound by treaties or not, the people can well use it without being asked or imposed by the government.

To conclude

I would say it is time for the people to take their destiny in their hands. This starts by protecting oneself and ones country. Protect local industries so that our people can keep their jobs and the country prosper.

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