Free Trade Vs Protection Economics

FREE TRADE VS PROTECTION
CHAPTER 1
INTRODUCTION
Trade has right from the creation of an organized market been an integral part of the economy of a Nation or Business. No economy beginning with the early Mesopotamian civilisation has survived and prospered without actively taking part in Trade both internally and with other foreign economies. International trade has not just helped nations to develop economically but also grow socially and culturally. Exposure of various foreign social cultures and practices brought forward by International trade has in many instances helped economies develop as a whole. However this concept of gaining mutual benefit from exchange of goods and service had held two contrasting ideologies regarding the level of control placed on trade. They are Free Trade and Protectionism. Both concepts have been in use in one form or another from times immemorial and each hold their advantages and downfalls. There continues to be a debate as to which trade policy is better suited in helping in the growth of an economy. However, like any economic ideology, Both Free Trade and Protectionism is dynamic concepts and each of them has had its place in history and with changing times and economic situations, policies of both ideologies have helped nations move ahead. In contemporary times, with rapid globalization and the unprecedented growth of the world economy in a short period of time, Free Trade policies are preferred as they help in maintaining a steady stream of resource both intellectual and material to be exchanged and mutually benefitted upon. An attempt to try and understand each aspect of these ideologies will never cease to exist and with changing situations, the applicability and usage of each of these concepts will continue to develop and change.
Free Trade and Protection in History

The history of Free trade witnessed its most dramatic moment in Britain in the culmination in the 1840s of a long conflict over protection. The Corn Laws (tariffs on imported grain, mostly
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wheat) were abolished in 1846 after a thirty-year battle. The Navigation Acts were repealed in 1949. Duties on a wide range of commodities were gradually dismantled over a long period from the 1820s to the 1860s. A number of duties survived (mostly for revenue purposes). However, by the 1870s, Britain provided the closest approximation in history to a country abiding by free trade principles. The transformation has been hailed by free-traders as a great victory for the principle, and as a symbol for broader application. Yet there were particular conditions attending the change. The height of the corn duties reflected atypical restrictions established during the Napoleonic War; by any reasonable consideration they had to be reduced. However, the specific battle over the Corn Laws absorbed the broad political tensions of mid-century Britain. Behind the high price of grain lay the entrenched power of the landlord class, resented by other sections of the community. Workers and the Lower middle classes (artisans, shopkeepers, etc.) resented the high price of bread (the staple of the typical diet); employers resented being pressured over wages costs that included a high bread price. At the same time, workers and the lower middle classes resented a restricted franchise that denied them the vote (reflected in the Chartist movement). Yet the free-trader businessmen were typically anti-democratic and fought to divert public dissent over the vote to safer demands over the price of bread. The Corn Laws battle thus involved a conflict over the fundamental structure of the British economy. By the early nineteenth century Britain had become the premier industrial power. The range of duties on materials (inputs into production) was increasingly counter-productive; so also were those on manufactures themselves, because they provoked imitation by developing European competitors. The Corn Laws also inhibited the export of manufactures, for lack of export income in the grain-growing countries. In short, there was a strategic vision behind the Corn Law battle one developing since the 1780s, following the loss of the American colonies. What followed was a recasting rather than a rejection of mercantilist doctrines. This was to be an era not of Free trade but of Free trade imperialism (Semmel, 1970). As one parliamentary speaker claimed during the 1846 debates,
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free trade was the principle by which foreign nations would become valuable Colonies to us, without imposing on us the responsibility of governing them (Semmel, 1970, p.8). This was a vision of Britain as Workshop of the world, exchanging Value-added exports for imports of materials and food, on advantageous terms. This epochal transformation of British trade policy is better understood as a process in which material interests are more significant progenitors of change than are abstract principles. Free trade was rational for Britain as the worlds premier industrial power. Moreover, there were two further material reasons why Britain persisted with free trade. First, protection in nineteenth century Britain meant protection of agricultural products. Free trade thus meant cheaper food, and it gathered the support of many low- and middle-income people through successive elections into the Twentieth Century. Second, by the late Nineteenth Century, the driving force of the British economy had become the finance sector, centered on the City of London and a handful of great multinational trading companies (such as Lever & Kitchen). Substantial profits were made in the mediation of international finance and trade, and free trade was functional to this process. The limited power of abstract principles was dramatically reflected elsewhere. As noted above, all the second-rank industrialising nations had become protectionist after the 1870s in the context of rapid industrial development, coupled with persistent economic crises. Britain survived the divergence in national trade policies between itself and other countries for as long as its earnings from exports of services (shipping, financial services, etc.) and from overseas investments compensated for its growing deficit on merchandise trade. When a long-term deficit on the balance of payments loomed, compounded by enormous losses from the First World War, Britain belatedly turned to the Empire for help. Thus was Imperial Preference born in 1932, although conceived fifty years previously and treated with derision at the time. The second important historical example is provided by the period after World War II. The 1948 General Agreement on Tariffs and Trade oversaw a subsequent significant freeing up of trade.
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The achievement was remarkable but, again, the context and process is illuminating. G.A.T.T. embodied a pragmatic procedure for an orderly reduction of tariffs through painstaking negotiation on the basis of mutual self-interest. The freeing of trade restrictions under this regime was significant but selective. The reductions were centered on manufactured goods and equipment. Liberalisation was not associated with greater national specialisation in the production and export of individual industries, as predicted by the textbooks. On the contrary, tariff cuts realised the potential for a higher level of reciprocal intra-industry trade in manufactures and equipment (Tussie, 1987). Agriculture was quickly removed from negotiations in the early 1950s. Metal commodities (and subsequently agricultural commodities) were subject to their own specific arrangements outside of G.A.T.T., with general output and pricing agreements to ensure medium-term stability of the particular industry. Textiles were subject to separate negotiations (contrary to G.A.T.T. principles) in the 1960s, under the Multi-Fiber Arrangement (M.F.A.). Starting with cotton textiles in the late 1950s, the M.F.A. generalised protectionism in textiles (Salvatore, 1992: Ch.5). This treatment of agriculture and textiles marginalised developing countries from the G.A.T.T. process. The United Nations became the focus of developing countries complaints, and the United Nations Conference on Trade and Development (U.N.C.T.A.D.) was formed to pressure for change. The advanced countries subsequently made some concessions in the form of Developing country preferences, with concessional access of some imports to first world markets. The major beneficiaries of the G.A.T.T. system were thus the advanced industrial countries. The United States, France and Japan, for example, have all acted to blend freer trade and protection opportunistically to enhance national and specific interests. The post-War experience of the move to freer trade has thus been more compromised than the experience under British dominance a century previously.
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Moreover, both achievements were the product of a favourable context the relatively security and stability of boom periods. Economists often offer a simple causal proposition that freer trade was responsible for the post-War boom. Economists neglect that the causation was in both directions. Trade liberalisation was as much a product of post-war growth as it was its source. Remember that the first major instance of a movement to freer trade occurred in the midst of a significant economic boom. Freer trade cannot be generated at will without sympathetic conditions, in turn conducive to attracting support of governments for multilateral cooperation.
The Historical Significance of Assertive Trade Policy

What determines a nations approach to trade? Economists are used to thinking in terms of trade being on natural lines, according to the Comparative advantage of each country in terms of resources. Governments are supposed to play an accommodating role, in facilitating Free trade for the mutual advantage of the populations in all trading countries. However, the historical record indicates that governments have always played an active part in trade. It is useful to examine the motives of governments in this arena, and the context in which approaches to trade were developed. In particular, it is important to examine the occasions when Free trade has been taken seriously, and the environments that were conducive to that development. At its most fundamental, trade policy embodies a political ambition to use a countrys level and structure of trade as a vehicle for more rapid economic development. Trade policy is often complemented by industry policy, to support or improve the capacity of domestic industries (sometimes the two are indistinguishable). National governments may adopt an assertive trade policy to advance their countrys standing internationally, or as a defensive measure to prevent their populations standard of living going backwards from the assertive action of others. Essentially, international competition involves governments as well as profit-oriented businesses, and trade policy is an integral part of this competitive process.
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Implicit in the concept of trade policy is the presumption of a strategic underpinning. A good example is provided by the Japanese approach to the acquisition of raw materials. Japans land mass is relatively impoverished in terms of mineral and agricultural raw materials. Overseas sourcing has been necessary for Japans fabled industrial take-off. Japans resources strategy first took the form of colonial expansion colonising parts of the mainland (Manchuria, Korea) to source mineral resources, and colonising islands to the south (including Formosa, now Taiwan) for materials like sugar. After defeat in World War II, Japans resources strategy has been continued by peaceful means, but it has been just as assertive a ruthless commitment towards ensuring resources supply that is both secure and at minimum prices. Australia has been on the receiving end of this strategy in terms of Japans sourcing of coal (Colley, 1998). Japan has coordinated its purchases of both thermal coal (for electricity) and coking coal (for steel) via a single bargaining agent, leaving Australian suppliers to compete amongst themselves for a contract. Japanese companies also invest in Australian mines to ensure a state of oversupply. Finally, the trading arm of Japanese conglomerates organises and ships the commodities, on pricing arrangements determined internally. Japanese trade policy towards raw materials supply is thus comprehensive.
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CHAPTER 2
FREE TRADE What is Free Trade?

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.
It was this insight by the 18th century economist Adam Smith which concisely explains the seminal principle of Free Trade. Trade is one of the most essential economic activities in the 21st century and no state can effectively stand to develop without actively taking part in it. Globalization, especially after the Second World War has allowed businesses and nations across the world to market their products and services with other economies leading to a rapid growth in international trade. The development of communication and travel has ushered in an era of countless new trends, services and commodities all with endless possibilities. All this has resulted in a rise in human interaction and has led to the opening up of world economy. Trade without restrictions has brought in the era of globalization and human advancement.
The main idea of free trade is that it follows a laissez-faire approach, with no restrictions on trade and it is a type of policy that allows traders to act and transact without interference from the government. Countries which engage in trade internationally without trade barriers form the fundamental basis for free trade. It is an established fact that Global trade allows countries to use their resources be it labour, technology or capital more efficiently. Free Trade encourages greater efficiency among local establishments, leads to greater product choice, and price reductions while encouraging local firms to expand and export. The main purpose of free trade agreements is to allow faster and more business between the two economies so that they maintain the stream of mutual benefit.
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Free Trade as a concept bases itself on the two theories of the Classical theory of Absolute advantage by Adam Smith and the Comparative Advantage Theory by David Ricardo. Smith, in his study recognized that fewer the impediments to trade, the richer everyone would become. He criticized the royal charters, tariffs, cartels, monopolies and his opposition to restraints on trade made Smith the progenitor of Free Trade. Ricardo expanded on the free-trade idea of Adam Smith by explaining why international trade is essential. According to him, each nation has a competitive advantage as everyone has something they do best and if they trade with each other, both parties will live better. Free Trade today is essential for any economys growth and survival. Maintaining international trade relations not only brings economic benefit but also brings that economy closer to the rest of the world both socially and culturally and almost all economies in the world today are dependent on other economies for resources both human and material. The development of science and technology has made the world smaller in terms of travel and better informed in terms of information and this has led economies while being fiercely competitive to also be cordially cooperative. Trade mechanisms like the NAFTA and WTO have been designed by the major world economist to help in maintaining a healthy trading relationship between businesses or economies.
A Brief History of Free Trade

The development of trade and its role in the development of the world economy is deep rooted and goes back to the earliest of civilisations. The need to coexist and maintain trade relations with other economies for goods and services was realised millennia ago by the founding fathers of our great civilisations. Trade was a major component of not just the economy but also the society and much was at stake in order to maintain trade relations with other nations and economies. Economists who had advocated free trade believed that trade to be the reason as to why certain civilizations prospered economically. This was illustrated by Adam Smith when he
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pointed out that increased trading had helped in the flourishing of not just the Mediterranean cultures of Egypt, Greece, and Rome, but also of East India and China. It was during the medieval ages when European nations such as England, France and Portugal started competing and building trade empires across Asia. These nations recognized the potential of the valuable spices and other exotic commodities found in India, China and other south East Asian countries went after them. These traders and trading establishments were highly competitive and they aggressively lobbied against trade restrictions. Most of the European Trade Cartels succeeded in establishing massive trading ports complete with factories by influencing the small kingdoms and their rulers using persuasive tactics and politics and amassed huge fortunes in a very short time. However, Free Trade has held more significance from the beginning of the 19th century when trade was the engine of economic growth. The advent of capitalism and industrialisation along with gold becoming the universal choice of currency led to many countries dropping restrictions on trade. While Britain maintained its position as the factory of the world, nations like United States and Germany quickly benefitted from free trade and rapidly industrialized around this time. Many liberals in Britain and United States came to believe that Free Trade promoted peace. The British economist J. M. Keynes suggested that free trade so long as it was combined with internationally coordinated domestic economic policies to promote high levels of employment, and international economic institutions meant that the interests of countries were not pitted against each other. This view was however temporarily put to rest with the advent of the First World War and the subsequent collapse of Wall Street which led to collapse of many major world economies. The Great Depression ushered in a new era of Protectionism with most major world economies severing their Free Trade policies and reverting back to protectionist measures. This depression continued into the late 40s and countries like Japan and Germany were reeling under severe inflation and economic downturn. This forced comparatively stable economies like the United States to open up their economies and lower their trade barriers. The General Agreement on Tariffs and Trade (GATT) was formed in 1948 and it was the result of 23 countries getting together to sign an agreement to reduce customs tariffs. The GATT ushered in a new era of globalization and increased trade between the major economies of the
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world. This agreement was the first of the many agreements which were to follow and which made an attempt to reduce trade barriers and protectionist policies and promote free trade. The Uruguay Rounds from 1986 to 1993 were one of the most ambitious trade rounds and they are directly related to the establishment of the World Trade Organization (WTO) in 1994. The WTO super-ceded GATT and is now the highest international authority which looks after Free Trade across the world. Other more regions bound free trade policies like the North American Free Trade Agreement or NAFTA were also created after the 19 to assist in creating better trade.
The Advantages of Free Trade

A famous economist providing motivation about free trade accurately summed up the concept of free trade in the phrase, "If you do something good for me, I will do something good for you." In 1776, Adam Smith while questioning the mercantile assumption that a countrys wealt h depends on its holding treasure (Holding treasure is the amount of gold a countrys treasury has rather than the amount of goods and services) said that a country had absolute advantage in the production of a product when it was more efficient than any other country in producing it. Therefore, Smith reasoned that if trade was restricted each country could specialize in products that gave it a competitive advantage. This specialization would increase their efficiency as Labour would be skilled by repeating the same tasks and all and long term runs would provide incentives for development of more efficient working methods. In the 21st century, there are many important reasons as to why voluntary exchange is good not only for the contracting parties but the world as a whole. The first being that trade improves global efficiency in resource allocation. A glass of water may be of little value to someone living near the river but is priceless to a person crossing the Sahara. The bottom line being that trade delivers goods and services to those who value them most. Next, trade allows partners to gain from specializing in the producing those goods and services they do best and when producers create goods they are comparatively skilled at, such as Germans producing beer and the French producing wine, those goods increase in abundance and quality. Finally, trade allows consumers to benefit from more
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efficient production methods. For example, without large markets for goods and services, large production runs would not be economical and large production runs, in turn, are instrumental to reducing product costs therefore Lower production costs lead to cheaper goods andservices, which raises real living standards. Free trade also fosters in a sense of competition and therefore scope for innovation. These instances along with empirical evidence support the idea that nations more open to trade tend to be richer than those that are less open. In a study conducted by prominent economists Jeffery Sachs and Andrew Warner in 1970 to measure the relationship between economic growth and international trade and how the openness of an economy helps in its economic development, they found that while open economies grew at a rate of 4.49% per year, closed economies only grew at a rate of 0.69% per year. This study clearly indicated that free trade seemed to produce higher levels of economic growth and standards of living.
However, no idea, policy or concept is complete without its contrast and criticism and no policy can ever be implemented without understanding the contrasting concept. Each concept holds true in its own right and therefore it is absolutely necessary to understand every aspect of it to create a complete picture. Protectionism is held in contrast to Free Trade and it is important to understand the significance and development of it to help in increasing the efficiency of an economy.
Characteristic of Free Trade:

Tariffs
The most common characteristic of free trade is the lack of state tariffs on imports. A tariff is a tax placed on incoming goods by the host country. it makes foreign goods, therefore, artificially more expensive than domestically produced goods, giving the latter a competitive edge.
Markets
Markets, not the state or even powerful economic actors, are empowered to make decisions in free trade systems. If foreign goods are priced according to market norms,
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then the winner in economic competition is who makes the best product at the lowest price. In protected trade, it often is the actor with the most political power who gets its economic interests protected.
States
Free trade takes the state out of the economic equation. States are disempowered to make any kind of economic decision concerning the global economy. Consumers and companies are then empowered to make these decisions based on their preferences rather than state policy.
Contracts
Markets are based on contracts between buyers and sellers. Therefore, the removal of the state from economic decision-making means the dominance of contracts over state regulations in global economics. In this case, free contracts are an important characteristic of free trade. Protected trade, on the other hand, is international economic activity controlled, at least in part, by the state.
Economics
Economics is at the center of free trade thinking. Politics is at the center of protected trade. Therefore, any free trade regime thinks in terms of economic categories: efficiency, markets and contracts. Protectionism thinks in terms of political categories: domestic producers, powerful interests, state power.
Globalism
Free trade demands a world without borders. In an economic sense, the states of the globe are irrelevant, only the demand of the global market has any economic relevance. Hence, under free trade, the globe becomes progressively smaller as corporations and bankers serve a global, rather than a national, market.
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Criticism of Free Trade

Economist Jagdish Bhagwati of Columbia University has been one of the most visible and resolute intellectual advocates for free-market globalization, but lately he sounds a lot like Lori Wallach, the brainy lawyer who leads Global Trade Watch. "The process of trade liberalization is becoming a sham," Bhagwati wrote recently in the Financial Times, "the ultimate objective being the capture, reshaping and distortion of the WTO in the image of American lobbying interests."
Wallach and other leaders of worldwide popular dissent have been making the same argument about bait-and-switch diplomacy for a decade. "Oh, absolutely," Bhagwati exclaims. "People like Lori Wallach are right." The multinational corporate interests essentially hijacked the pure "free trade" principles Bhagwati espouses and turned "free-trade agreements" into their own agenda for a densely layered legal codeinvestment rules that impose a straitjacket of do's and don'ts on developing-country governments.
The rights of foreign capital and corporations are to be expanded; the rights of sovereign nations to decide their own development strategies steadily eliminated. A country must not require multinationals to form joint ventures with domestic enterprises. It must not limit foreign ownership of its natural resources. National health systems, water systems and other public services must be open to privatization by foreign companies. Underdeveloped countries must, meanwhile, enforce the patent-rights system from the advanced economies to protect drugs, music, software and other "intellectual property" assets owned by wealthy industrialists. Any poor nation that dares to resist the WTO rule will face severe "sanctions"huge cash penalties and possibly de facto expulsion from the trading club.
"The developing countries are scared out of their wits now," Bhagwati says, "because they don't understand what they're being forced to sign. The agreements are going way outside the trade
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issues and involve a helluva lot of things like your access to oil, your access to intellectual property and capital controls. When I looked through the investment agreements, it was worse than reading my insurance policy for the fine print. I couldn't make anything out of it, and I'm a reasonably informed person, a pretty smart economist as they go."
Exactly.Obfuscation is power. The politics of trade resembles a maliciously lopsided power play in which the wealthiest industrial nations press the weak to accede to their terms or else get nothing back at the bargaining table, and very possibly lose their access to foreign capital or development aid. Trade ministers from poor countries naturally resist, but they don't have deep squads of corporate lawyers to argue the fine points and they don't want to be the troublemaker accused of blowing up the trading system. I fully support free trade, and always will if not on economic principles then on the moral principle that everyone should have the freedom to make their own economic decisions, and compete on a level playing field. But if free trade really does benefit everyone in the long run, then American corporations are actually harming themselves with their protectionist measures. That is bad business, and not in the best long-term interest of the shareholders. It's funny that capitalists, of all people, would be afraid of competition.
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CHAPTER 3
PROTECTION
What is Protectionism?
While Free Trade has helped the world economies to open up and develop, it is not without criticism and contrasts. The concept of protectionism and protectionist economy does exactly what Free Trade refrains from doing. Protectionism can be briefly explained as an economic policy that restrains trade between states to "protect" businesses and workers within a country by restricting or regulating trade with foreign nations it is designed to discourage imports, and prevent foreign take-over of local markets and companies. This is achieved using protectionist policies and methods such as imposing tariffs on imported goods, restrictive quotas on imports, Anti-Dumping legalisations against dumping by foreign corporations, Subsidies, both direct or indirect given to local firms to promote their growth so as to counter foreign encroachments, Export Subsidies, used to increase exports, Exchange rate manipulations used to lower the value of the currency to achieve an improved trade balance and a variety of other restrictive government regulations.
A Brief History of Protectionism

Ever since the beginning of organised trade there have existed some economic ideologies and concepts which even to this day play a vital role in its functioning. Protectionism is one such economic concept that has been used at almost every step of trading history. No economy has ever avoided using protectionist measures or policies at one time or another to maintain its internal trade balance. Protectionism is closely related to mercantilism which holds that the prosperity of a nation is dependent upon its supply of capital and that the global volume of international trade is "unchangeable". Also economic assets are represented by bullion held by the state that is best increased through a positive balance of trade with other nations. Most
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European nations during the medieval ages from the 16th to the 19th century followed mercantilist policies and it fuelled European imperialism and its many wars. However, by the late 18th century mercantilism began to fade away and it is today almost rejected as whole by Economists. Protectionism on the other hand is much more evolved form and it is sometimes used even today by countries to protect their economies from excessive encroachments by outside businesses and economic influence.
The last time protectionist measures were adopted was during great depression when most major economies pulled down their trade shutters and focused more on internal economic recovery and employment generation. The recent economic downturn has led many countries to rethink their international trade policies and tighten their trade regulations. However from past instances in history, free trade regulations and the benefits derived from it outweigh the benefits derived from being a closed protectionist economy and therefore trade regulations will be modified only to a certain extent if any.
The Advantages of Protectionism

Protectionism as a concept is fundamental part of trade dynamics and many economies of the world recognize it potential. However some factors of protectionism stand out in the present day scenario and still hold a firm place in todays free trade dominant trade pavilions. There exist in every economy some aspects which find the need to be protected from excessive and lenient trade policies. Infant industries may need temporary tariffs and quotas to survive against established foreign producers if these firms are producing new-technology goods such as computers and mobile phones. Dumping and Unfair competition in the form of subsidies and government benefits to foreign firms may result in local businesses losing out and protectionist measures will help local, small-scale firms build a base for themselves. Protectionist policies of the government may also help in improving their balance of payment as there is more export and lesser import. This also protects declining industries from creating further structural unemployment.
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In fact, one of the major advantages of protectionist measures is it helps in maintaining and generating the employment of the country. Employment opportunities of an economy are generally reduced when there is rampant establishment of foreign companies as people from those foreign economies take away the jobs of this economy. Strict trade restrictions help in maintaining a balance in the internal economy of the nation and ensure that the people living in that country are not deprived of their opportunities. Unemployment, Underemployment due to free trade policies is best highlighted in developing countries where Workers are under paid and lack any kind of union and legal representation and protection are forced to take jobs that exploit them. It is no surprise that Global companies often indulge in exploiting labor in developing nations as they are easily targeted and influenced and because these nations rely on export based industries for economic generation.
The Disadvantages of Protectionism

In the long term, trade protectionism weakens the industry. Without competition, companies within the industry won't innovate and improve their products or services. There's no need to. Eventually, consumers will pay more for a lower quality product than they would get from foreign competitors. Job outsourcing is a result of declining U.S. competitiveness, itself is a result of decades of the U.S. not investing in education. This is particularly true for high tech, engineering, and science. Increased trade opens new markets for businesses to sell their products. The Peterson Institute for International Economics estimates that ending all trade barriers would increase U.S. income by $500 billion. Increasing U.S. protectionism will further slow economic growth and cause more layoffs, not less. If the U.S. closes its borders, other countries will do the same. This could cause layoffs among the 12 million U.S. workers who owe their jobs to exports.
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Methods of Protectionism
Tariffs
A tariff is a tax on foreign goods upon importation. Tariff rates vary according to the type of goods imported. Import tariffs will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported.
Impact of Tariffs
Tariffs lead to higher prices for imports and thus Imports fall Domestic consumers have to pay higher prices and buy less. Domestic producers gain, as they get higher prices and sell larger quantities. As we can see in the diagram domestic production increases from 0Q1 to 0Q2. Moreover their revenue increases from PwQ1 to Pw+TQ2 Higher domestic production leads to increased domestic employment. Government now gains from tariff revenues, which can be represented by e in the diagram Tariffs are regressive in nature and thus worsen income distribution. Exporting countries lose due to fall in exports.
Quotas
An import quota is a type of protectionist that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. This leads to a reduction in the quantity imported and therefore increases the market price of imported goods. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy.
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Effects of Quotas
Domestic production increases from 0Q1 to 0Q1+Q3Q4. Domestic consumption fall from 0Q2 to 0Q4 Imports fall from Q1Q2 to Q1Q3 Consumers end up paying more. Before quota was imposed they were paying Pw, but now they are paying Pw+Quota Domestic producers gain as they sell more at higher prices (Pw+Quota) Domestic employment increases as domestic production rises. Government gets quota revenues Domestic society is worse off due to decrease in consumption and production by less efficient producers Exporting countries lose revenue Quotas result in global misallocation of resources as goods are being produced by inefficient producers. J and K represent the dead weight loss of welfare to the society, as J represents production by inefficient producers and K represents the loss of consumer surplus.
Subsidies
Government subsidies (in the form of lump-sum payments or cheap loans) are sometimes given to local firms that cannot compete well against foreign imports. These subsidies are purported to "protect" local jobs, and to help local firms adjust to the world markets.
Effects of Subsidies
Consumption of the good is not affected. Consumption remains at Q3. Taxpayers lose as the tax revenue collected is being used for subsidies Domestic producers gain as the production increases from 0Q1 to 0Q3. Employment increases as more is being produced domestically.
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Exporting countries are worse off Global misallocations of resources as inefficient producers are now producing goods.
Administrative Barriers
Countries are sometimes accused of using their various administrative rules (eg. regarding food safety, environmental standards, electrical safety, etc.) as a way to introduce barriers to imports.
Embargo An embargo is the prohibition of commerce and trade with a certain country, in order to isolate it and to put its government into a difficult internal situation, given that the effects of the embargo are often able to make its economy suffer from the initiative.
Anti-dumping legislation Supporters of anti-dumping laws argue that they prevent "dumping" of cheaper foreign goods that would cause local firms to close down. However, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters.
Arguments in favour of protectionism

Infant industry argument It is argued that government should go in for protectionist measure to protect infant industries, or else they will not get an opportunity to survive due to international trade.
Efforts of a developing country to diversify Developing countries need to protect industries in which they want to diversify.
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Protection of employment Protecting domestic industries also means protecting domestic employment.
Source of government revenue Tariffs form a good source of revenue for governments.
Strategic arguments it means use of a tariff to protect military capability. The idea is, to consume the goods of our country to promote the national industry and so, in the case of war we don't have to buy the products in a foreign country and our industries have the capacity to produce all the goods that our country need. We want tariffs to reduce the dependence on international resources.
Means to overcome balance of payments disequilibrium High imports as compared to exports might lead to severe balance of payments issues. Government might resort to protectionist measures such as tariffs and quotas to restrict import and thereby control the balance of payment disequilibrium.
Anti-dumping Dumping is when manufacturers export a product to another country at a price either below the price charged in its home market. This harms the domestic industry and employment. The importing country might resort to protectionist measures such as tariffs to control dumping of these goods.
Arguments against Protectionism
Misallocation of resources It leads to global misallocation of resources, as it supports inefficient producers and in certain cases (tariffs and quotas) consumer surplus is scarified.
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The danger of retaliation and trade wars Continuous protectionist measures by a country might lead to retaliation of other countries and they might also put protectionist measures on the imports.
The potential for corruption Putting administrative controls might also lead to corruption.
Increased costs of production due to lack of competition Constant protection to the domestic producers and lack of competition propagates inefficiency and lack of initiative to control cost.
Higher prices for domestic consumers As we can see due to tariffs and quotas domestic consumers end up paying more.
Increased costs of imported factors of production Imported goods become expensive which might also lead to imported inflation.
Reduced export competitiveness Continuous protection to domestic industries (such as subsidies) might make them inefficient in terms of cost and technology. In the long run they might become uncompetitive in the exports market.
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CHAPTER 4
DISTINCTION BETWEEN FREE TRADE AND PROTECTION

The Distinction between Free Trade and Protection
Observing the various characteristics and trends set by both Free Trade and Protectionism, we can clearly draw a line between the two concepts. Clear distinctions can be sought observing the history and advantages of the two concepts and it can be observed that both concepts contrast one another other and ones advantage can be pictured as anothers disadvantage. For instance, while free trade helps in the growth of a developing economy through foreign investment, Multinational corporations may also exploit the workforce because of their dependency on job. However, with contrasting principles comes the task of balancing them. No economy can successfully survive on either of the ends and it needs to find a suitable middle ground based upon its prevailing internal factors to effectively benefit and prosper. It is therefore trade policies which help in maintaining this balance that have to be created to help in the advancement of an economy.
Image source: http://digital.library.lse.ac.uk/objects/lse:gev962ban
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Liberal Party poster clearly displaying the differences between economies based on Free Trade and Protectionism. The Free Trade shop is full to the brim of customers due to its low prices whilst the shop based upon Protectionism has suffered from high prices and a lack of custom.
Free Trade v/s Protectionism

No country in the world is self-reliant and has to depend on other nations to meet the demands of its infrastructure and economy. Trade between countries is as old as civilizations but of late there has been a debate over the pitfalls of protectionism and the benefits of free trade between countries. Before differentiating between free trade and protectionism, we need to learn a bit about protectionism.
What is Protectionism?
Protectionism refers to policies, rules and regulations that help a nation place barriers in the form of tariffs while trading with any other country. It is sometimes also a ploy by a country to safeguard the interests of its domestic producers as cheap imported commodities tend to shut down factories making that commodity inside the country. Though at times protectionism is adopted to serve national interests, there are times when countries cry foul as they face noneconomic tariffs. For example, carpets made in India are world famous and India exports them to many countries including Europe and the US. But suddenly US chose to place barriers in this trade citing use of child labor in the manufacture of carpets in India.
One of the easiest ways to reduce imports of commodities is to raise the price of imports by putting in place tariffs. This helps domestic producers as they remain competitive in the domestic markets. Other ways of protectionism are to place quota restrictions on commodities so that the quantity entering the country is miniscule which does not affect local producers.
What is Free Trade?
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The concept of Free trade on the other hand refers to a situation where there are no barriers in trade between two countries. This not only helps both the nations, it also paves the way for cooperation and trade in more areas and removing mistrust and ill will that is always there in an atmosphere riddled with sanctions, tariffs and embargos. Free trade does not take place overnight and this is why nations are entering into economic pacts and agreements to slowly and gradually remove all such artificial tariffs. Free trade encourages transparency and healthy competition. Nations have come to realize that others can be superior to them in production of certain goods and services while they can be superior in other areas. To help nations of the world prosper through international trade, GATT has paved the way for World Trade Organization that sets the guidelines for international trade and puts into place a robust mechanism for the resolution of disputes between member countries.
Free trade is an ideal situation while protectionism is the order of the day in international trade Protectionism takes many shapes and sometimes, countries crying foul as they are made to suffer hardships cannot even prove it WTO has been set up to pave the way for free trade by gradually removing all artificial barriers between member countries Free trade encourages healthy competition whereas protectionism leads to jealousy and ill will.
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CHAPTER 5
INDIA AND ITS FOREIGN TRADE POLICY
The world in twenty first century is remarkably different from the cold war period. The end of ideological clash and strategic competition between the superpowers which had tremendous role in accentuating conflicts across the world generated new hope for building a peaceful and cooperative world order. Instead there is a great deal of uncertainty in the emerging global order. New conflicts and issues have surfaced in the form of ethnic conflicts, refugee problem, environmental degradation, terrorism; etc. Foreign policy of a country is determined by the times in which it is conducted. In twenty-first century, foreign policy of India is going to be very different from what it was when country became independent. At that time there were wellknown two blocs, the USA and the USSR. Indias foreign policy rightly did not wish to become a part of either of two blocs and evolved what is known as a non-aligned group of nations. The world politics after 1991 emphasizes the need for a fundamental rethinking in Indias foreign policy.
India in the early twenty-first century has become a focus of international attention more than ever before. In the pyramid of world powers in 1947, India was perhaps at the rock bottom. However, within a short span of three or four decades India had pushed forward its position and became a most developed country among the developing countries. India is the seventh largest country and next to china having the highest population in the world. It is well marked off from the rest of Asia by mountains and seas, which give the country a distinct geographical identity. Foreign policy is an instrument at the disposal of a country to protect and promote its national interests. The core of the national interest is constant-defend the territorial integrity and sovereignty, enhance the economic and social well-being of the people, promote opportunities for profitable trading relations with other countries, and exploit the soft power through propagation of the cultural assets. While the national interest would be forever, its content will
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vary with time and circumstances. It follows that the policy has to be flexible and must keep in tune with changing international, as well as national, environment. This paper is a modest attempt to analyze Indias foreign policy as an instrument for protecting national interest, what success it has got and what challenges it is facing in the 21st century. India has not been far behind in reaping the benefits of globalization and it has after the 1990s or the so called Post Liberalization Era extensively participated in trade with the other economies of the world. Improved Export Import policies along with lower tariffs and the establishment of Special Economic Zones (SEZ) has attracted a huge amount a foreign investment and that has led to the rapid development of both rural and urban areas. The IT boom and India featuring as the most potential investment destination has ushered almost every major multinational corporation to invest heavily in India. I However, India while steadily opening up its economy has still maintained restrictive investment and trade norms. It has retained its power to protect when needed and this has been very effective in cushioning the impact of the recent economic downturn. Nonetheless, the governments stand on trade and investment policy, in recent years has displayed a marked shift from protecting producers to benefiting consumers. This is reflected in its Foreign Trade Policy for 2004/09 which states that, "For India to become a major player in world trade ...we have also to facilitate those imports which are required to stimulate our economy." It is clear that India is now aggressively pushing for a more liberal global trade regime, especially in services. For instance is that it has assumed a leadership role among developing nations in global trade negotiations, and has played a critical part in various trade negotiation rounds including the ever important Doha negotiations.
India has been aggressively moving ahead on the global stage and has signed various trade agreements with its neighbours and is seeking to establish trade relations with new ones including many East Asian and European countries. Some of the important existing trade agreements include the India-Sri Lanka Free Trade Agreement, India-Nepal Trade Treaty, and the Comprehensive Economic Cooperation Agreement (CECA) with Singapore and Framework Agreements with the (ASEAN). Being an active member of the WTO, India also has trade agreements with China, South Korea, Brazil and many such major economies of the world.
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Trade pacts with the European Union and United States are also in the pipeline. The 123 Agreement with the United States in 2008 can be considered as a founding stone to renewed trade relationship with the US.
It is therefore evident that India is very much a vital player in world economics and trade and it has its GDP and growth indicators to back it up. India is one of largest and fastest growing economies among the developing world and it is considered as one of the largest markets for commodities and services from around the world. With reforms to create a more flexible trade policy, Indias economy is bound to grow at a faster rate and lead the country to greater heights of economic and social prosperity.
Image source: www.indiamart.com
There are three main determinants of foreign policy People, history and geography:
People- identity, values, aspirations and skills History- circumstances, opportunities and constraints of the past Geography- location, resources and neighbourhood
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India was an old civilization with great cultural resources which, however, was stratified socially, economically and politically. Three major developments changed the character of India: The direct involvement of the masses in the freedom movement in the first half of the 20th century with independence in 1947 and, in spite of the Partition, an identity as a secular nation. The ambition reflected in the Preamble of the1950 Constitution to form an egalitarian, secular, socialistic-type just society focused on the social and economic development of the people and politically united into a democratic republican nation.
The economic reforms of 1991, liberating the trading and entrepreneurial spirit of the people The near coincidence in time of Indian independence and Partition, the beginning of the Cold War in the aftermath of the World War II and the Communist victory in China created a difficult situation for India. It led to a foreign policy of non-alignment as a means of retaining strategic autonomy combined with an effort to create solidarity of Asian/ developing countries as a political support base. In the wake of the Cold War, Indias pro-Soviettilt and Pakistans total support for the West as well as Chinas occupation of Tibet, helped to exacerbate the neighbourhood tensions. In spite of trying to settle peacefully through the UN the Kashmir issue created by Pakistans aggression, the issue got converted there into an Indo-Pakistan dispute. Two wars, one in 1965 and the other in 1971, the latter changing the political geography of the sub-continent, and the respective peace agreements signed in Tashkent and Simla failed to resolve the problem. Subsequently, Pakistan started using terror as a state policy to try to force India to submit as part of its proxy war strategy. India China border dispute arising out of an assertive China unwilling to accept imperialistimposed borders, was not contained by the Panchsheel Agreement whereby India accepted Tibet as an autonomous part of China without demanding any tangible quid pro quo, such as acceptance of the McMahon line as the boundary. In fact, the offer of refuge to Dalai Lama in India in 1959 heightened Chinese suspicions, the breakdown of negotiations, and Indian forward
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policy, among other things, saw China teach India a lesson by attacking in 1962 which led to a humiliating military defeat for India. Chinese occupation of Aksai Chin and claims on Indian Territory like Arunachal Pradesh are unresolved. Indias Hindu rate of growth meaning growth dependent on natural biological growth, as Hinduism does not practice conversion, rather than any pejorative reference to the religion or its adherents of around 3.5 % economic growth rate vis-a-vis our population growth rate of around 3% during that period, for most of the first half of the twentieth century under the British and marginally better from 1950s to 1980s meant in per capita terms almost nil growth rate implying very little capacity for national accumulation. The problems of illiteracy, disease and poor infrastructure were other constraints. This led to command economy policies (e.g., Second Five year Plan, etc). These meant not only ideological distaste for India but also its lack of attractiveness as a profitable trade and investment partner for the US business. Combined with Indias pro-Soviet tilt, it implied less than cordial relations with US. This was seen during the Bangladesh War and in the aftermath of Indias peaceful nuclear tests in 1974 when the US put in place a very strong nuclear non-proliferation regime both at home ( through Nuclear Nonproliferation Act, 1978, Pressler and Symington Amendments, etc.), and internationally through IAEA and NSG mechanisms.
The collapse of the Soviet Union in 1991changed the prospects for India. Forced to deal with a uni-polar world, India made new approaches such as its Look East policy towards the miracle economies of ASEAN.. The rise of Indian software globally as well as the rise of IndianAmericans in US and the market-oriented reforms in India combined with freeing US from seeing India through anti-Soviet prism gave a positive fillip to Indo- US relations. The end of the Cold War also reduced the importance of Pakistan in US eyes. Even the nuclear tests of May, 1998 which made India declare itself as nuclear weapon country which initially led to US sanctions, did not prevent a change of approach on the part of the US noticed during the Kargil War with Pakistan in 1999 and reflected through the 2000 with President Clintons visit and the lifting of these sanctions in 2001. Relations between India and US can be said to have really
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turned around with President Bushs announcement in July, 2005 that the US would offer help to India in civilian nuclear energy. This led to the Indo-US Civil Nuclear Agreement.
The importance of the Indo-US Nuclear deal lies not merely in that it allowed supply of nuclear fuel and access to nuclear technology, important as they are for Indias economic development, but also in that it was contrary to the stipulations of the Non-Proliferation Treaty (NPT) and, more significantly to the entire US non-proliferation efforts, domestically and internationally, in the wake of Indias 1974 test. Furthermore, it was also considered to be a one-time exception only for India. It meant that in the eyes of the most-powerful nation, India had arrived. Furthermore, we share considerable common interests with the US and have a lot to gain from our partnership with them. However, we should not be carried away by any Hindi-Amreeki Bhai-Bhai euphoria. We need to keep in mind the possibility of our being co -opted against China and nor can we afford US and China ganging up against us. Since it is also unlikely that we will side with the Chinese against the US, it would be in our interest to have a subtle trilateral balancing interaction among India, China and the US. At the same time, the increasing radicalisation of Pakistan and its near failed state situation poses a threat to India and, indeed, to the rest of the world. In particular, the discovery of Osama bin Laden in Pakistan among other events has rather adversely affected Pakistans image in the world and the economic support that it can expect from the external world. The perception of Indias rise in the eyes of the external world is also visible in its economic growth potential. With economic growth consistently in the range 7 to 8 % and even touching 9% in the three years before 2008, averaging over the last twenty years nearly 8% growth rate and a per capita average growth of over 5%, as the population growth rate had dwindled to less that 1.6%.This also seen in the savings rate rising steadily from less than 10 % until 1955, to around 33% over the last several years. Combined with the demographic dividend in the coming decades, India economic growth rate is expected to overtake even Chinas. The famous BRIC reports of Goldman Sachs also corroborate the great potential for Indias rising economic stature in the coming years and decades. India is now in G-20. However, India is still the poorest in G-
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20 and is expected to face increasingly acute scarcity of land, water and energy resources as well as environmental problems.
The fact that three out of the top four economies by 2050 would be Asian- China, India and Japan-, the other being the US, underscores the shift of economic power from the West to the East and the concomitant likely political power profile. It would also bring into focus developmental models based on authoritarianism versus democracy as well the importance of soft power. After all, India has right from the start been a model for other developing counties as what is possible in an open democratic governance system.
Overall, with the collapse of the Soviet Union in 1919, the on- going decline of Europe and the recent euro-zone crisis sharply denting the dream of United States of Europe, the several hundred years era of European domination is ending. Depending upon our leadership, India may rise to be among the top three global powers. But a global power status, including a permanent Security Council seat, without an inclusive growth at home, dignity and security for all its citizens cannot be our final goal.
India and its relation with super powers

The collapse of the USSR, this was close ally to India during cold war; one of the greatest challenges that India faced to make a balance relation with super powers. India needed to determine its policies towards the other global powers like America, China, Russia, Japan and European Union. Indias main foreign policy objective is to achieve global power status. It will however, depend greatly on its relationship with the US, and the other superpowers, to attain this. The dynamics of Indias relations with each of the other five powers will determine its global power status.
It was major challenge for India in the 21st century to keep the United States (US) as the focal point of its new foreign policy. The Indian delegation pointed out that, after the end of cold war, India was willing to diversify, and also to expand economic,
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technological, cultural and educational relations with US.7 The main reason for this is that close relations with the US will help to convince the international community that India is truly a global player. India and the US have been cooperating recently in several areas including in defense and the technology. The highlight of their cooperation in recent times has been the civil nuclear energy cooperation deal that has been signed between both countries. The civilian nuclear deal is a positive development in Indo-US bilateral relations, there is still a need for India to carefully man oeuvre its foreign policy to manage ties with US. The Indo-US bilateral relationship progress through the next step in strategic partnership initiative (NSSA) is also notable, as it is believed to lead towards significant economic benefits for both countries and improve regional and global security. America and India agreed to expend co-operation in three specific areas viz. Civilian nuclear activities, civilian space program and high technology trade. The 123 nuclear treaties was historical event in confidence building for both countries.
So, it is evident now that the US-India relation has progressed remarkably in the postcold war period. 9/11 terrorist attack reinforced a perception of a broader political and strategic similarity of interest pulling India and the US together. Some another pull factors, such as, belief in democracy and democratic values, peace building and cooperate with United Nations are also bring India and the US very close.
Besides the US, China is another superpower and playing an important role in world politics in general and particular in Asia. Chinas rise poses challenges to India to achieving its foreign policy objectives. India and China found themselves as a rivalry, competitor and co-operator in twenty first century. They are rivalry about the border issues, competitor in market economy, for influence in Asian politics, not only in ASEAN but also in south and west Asia. There are so many issues in world politics, on which both countries found them in co-operation, such as, in south-south dialogue, for new economic world order, energy security, environmental issues and both are against to protectionism.
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Both Japan and Russia are strategic partners of India. Russia has been an important supplier of defence equipment and technology and will grow in importance to India with the current global shortage of oil and gas expected to exacerbate in the coming years, energy security will become an important facet of countries foreign policies, including Indias. As such, it is important for India to not only secure access into key energy markets but also to diversify its sources for oil and gas so as to reduce its dependence on a particular supply. Relations with Russia continued to mature and involved a long standing multidimensional approach involving security, military, and economic links.
Another domain of opportunity for the Indian foreign policy is growing interaction with European Union (EU). India has a strategic partnership with EU. The most significant aspect of this partnership is that India is only the fifth country besides the US, Canada, Russia and China with whom the EU has established such equation. This partnership launched in January, 2005 in various areas; such as, trade and investment, protection for intellectual property, co-operation in science and technology, education, terrorism and democratization and decentralization of UN. EU and India should hold continuous dialogue on organizational and institutional restructuring and reform of the United Nations in particular. This quite good relation is consequences of Indias vibrant democratic institutions, emerging economic power and increasing global status.
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CHAPTER 6
THE GLOBAL PERSPECTIVE ON INTERNATIONAL TRADE

As highlighted earlier, globalization had enhanced and renewed the will of the economies of the world to trade and benefit from each other. Major leaders of the world economy like the United States of America, Japan and Germany have all aggressively participated in world trade and have benefitted enormously from it. The United States and the European Union are the most active advocates of Free Trade and they have benefitted enormously by limiting their trade barriers. Even the latest economic collapse has only acted as a speed breaker in continuing and expanding trade relations. With signs of recovery around the corner, the major capitalist economies of the world are beginning to resume their trading activities with the same pace as was observed before the economic collapse. The European Union or the EU and the United States with their aggressive trade pacts such as the NAFTA for the Americas and internal trade pacts and standardization of currency for the EU have permitted these economies to trade with virtually nonexistent trade barriers that have allowed these countries to expand their industries and commodities all over the globe.
China, too after its gradual opening to trade has probably the most aggressive participant in global trade. International Trade has resulted in unprecedented rates of growth and China is the most important future super power of the world. One of the most significant steps China had taken towards Free Trade was to finally join the WTO in 2001 after 15 years of negotiations. This resulted in major economies like the United States, France and Germany investing heavily in China. China is now the preferred destination for most investors and it stands to overtake the United State as the worlds largest Economy in a few years. The World leaders at the recent G8 talks at LAquila, Italy called for attention towards the growing Global Food Crisis and suggested a possible review of the current free trade policies towards the production and trade of food grains. Agricultural development has taken center stage at world economic summits after severe food shortages in spite of sufficient production. Discrepancies in the allocation and
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unethical trade practices of many business and economies have come to light following this and a call has been sounded for world economies to tackle this problem quickly and efficiently. While some call for international trade and reduction in existing trade barriers to tackle this problem, others argue that excessive trade and unethical trade practices arising out of free trade such as dumping to be at the root of the issue. Only a concentrated study of the situation and an honest effort by the major world economies into this problem can determine and subsequently tackle the actual cause of the growing crisis.
Image source: www.ips-dc.org
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CHAPTER 7
CONCLUSION
Why Free Trade is more popular that Protectionism in the 21ST century.
Societies that enact free trade policies create their own economic dynamism which help in fostering a sense of freedom, opportunity, and prosperity that benefits every citizen. In recent years, many world nations have demonstrated the power of this principle. For instance, by breaking the cycle of poverty, the most impoverished countries of the world can begin to create their own dynamic toward prosperity.
Foreign policy is changeable; it changes with time and circumstances. With the end of cold war, world politics became totally change and many challenges emerged in front of nation-states in terms of their foreign relations. Indias policy planner brought changes in foreign policy according to changed world scenario. With her long-term and short-term national interest, Indias foreign policy becomes closer to realistic approach. But it is hard to say that, the idealistic components of Indias foreign policy are just irrelevant. In the new form, colonialism and imperialism are exist in the world, pseudo war, drug trafficking, nuclear armaments and other threats to human security are incredibly grown. To eliminate these problems, the idealistic components of Indias foreign policy are relevant.
Since the end of cold war, India has been deepening its relations with super powers. US become focal point of Indias foreign policy. Although it is necessity of age that, to make closer relation with super powers but Indias tend to US is questioned to its independent foreign policy. For instance, Indias vote against Iran in IAEA. While India has historical relation with Iran. Due to this the Indo-Iran gas pipeline project has been failed. Such kind of diplomatic failure will be stands the barrier in the way of Indias energy security process.
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The end of the Cold War and the growing impacts of globalisation are also making India redefine its position and role both at the regional and at the global level. Since the economic liberalisation of the 1990s, which lead to current growth rates of 8-9 percent annual, Indias global presence has been steadily visible. Economic development would require energy security. Improving energy security and energy conservation should be top priorities of India with addressing environmental safety net. Nevertheless, despite all the evidence to the contrary, the opponents of free trade will continue to espouse the old arguments like that of "the jobs created by globalization are often less sustaining and secure than the livelihoods abolished by it in developing nations. Such claims presuppose that some sort of agrarian utopia previously existed in these countries and that their peoples will not reap the benefits of economic development. To argue against the development carried by technology and innovation is akin to arguing that the United States and Europe, to cite just one example, were better off before the Industrial Revolution. The Revolution brought freedom of movement and increased opportunity to all economic levels of society all over the globe. Only, some nations derived more benefit quickly while others took more time to stabilize and reap its benefits. A comparison of the economic growth between China and it break away neighbour Taiwan illustrates this idea. The Taiwanese government in the 1960s chose to institute widespread reforms to guarantee private property, establish a legal system to protect property rights and enforce contracts, reform the banking and financial systems, stabilize taxes, distribute public land to individuals, and allow the market to flourish. The Real GDP per capita of Taiwan and China was compared and tracked for the next three decades. For India, Post Liberalization with reduced trade barriers and increased foreign investment has set the stage for social and democratic progress of a magnitude that would have been impossible earlier and although as history suggests that this new era of market globalization may well be accompanied by new problems for which the solutions will once again lie in the power of human ingenuity and innovation. Globalization has presented the world with an unprecedented level of opportunity for people to achieve economic freedom and greater prosperity.
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BIBLIOGRAPHY
AUTHURS:
Dr. Evan Jones Walter Johnson Kimberly Amadeo Rob May Ambikesh Tripathi Ambassador Balkrishna Shetty
WEBSITES:
www.businesspundit.com, criticism of free trade, archive economics by Rob May on September 8th, 2003. www.differencebetween.com, difference between free trade v/s protectionism, by Olivia on May 13th, 2011. www.dineshbakshi.com, methods of protection. voiceof.india.com, Indian foreign policy problems and prospects, by Ambassador Balkrishna Shetty.
URL LINKS:
http://www.nationalobserver.net/2000_autumn_109.htm http://voiceof.india.com/lectures/indian-foreign-policy-problems-and-prospects/5386 http://www.academia.edu/783270/Dynamics_of_Indias_foreign_policy
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http://www.dineshbakshi.com/ib-economics/international-economics/157-revision-notes/1908floating-exchange-rate http://www.businesspundit.com/criticism-of-free-trade/ http://www.scribd.com/search-documents?page=8&query=free+trade+vs+protection http://www.differencebetween.com/difference-between-free-trade-and-vs-protectionism/
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Free Trade Vs Protection Economics

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FREE TRADE VS PROTECTION

Free Trade and Protection in History