Protectionismcan be viewed as a type of economic policy that restricts/limits trade betweencountries through various measures such as tariffs, quotas, subsidies, taxcuts, exchange rate interventions, legislations and other governmentinitiatives. The policy is used to make sure that domestic businesses,producers, workers and jobs are shielded from foreign competition. The policyis typical for both developed and developing nations.
In recent years the moreand more countries have been adopting stances in-line with protectionisttendencies.The opponents of protectionistpolicies argue that the so called merits of the policy are limited and contestable.They argue that in the long-run the trade restrictions hurts the people it aimsto help by impeding economic growth and driving up prices. It leads to distortionin the market and lower levels of efficiency. There are considerable deadweightlosses making a significant dent in consumer and producer surplus.
The negative effect is felt by people of thecountry adopting protectionism as well as in the countries being protectedagainst. Increased protectionist policies lead to an overall decline in the volumeof world trade.The advocates of protectionism argue that absence of it leads tounemployment and low wages in developed countries. Since developed countrieshave higher cost of business as compared to low wage countries so in case offree trade, there is a loss of jobs in the developed nations since they cannotcompete due to their higher labour costs. Their argument essentially boils downto the fact that out-and-out liberalization of trade (free trade) would resultin large and disparately distributed profit & loss as well as considerable disruptionof labour force engaged in sectors competing internationally. Ingeneral, economists are in consensus that the cost associated withprotectionism far outstrips its advantages and free trade is the way forward.
However,in recent years there has been a rise of protectionist sentiments. With the electionof a conservative president in the US (Donald Trump) there has been apronounced shift in US policy that has far reaching consequences for developingnations. Specific policies such revamping of visa system and pulling out oftrade blocs such as TPP shows that Mr. Trump plans to deliver on his campaignpromise of bringing back American jobs and insulating the US economy. Similarsentiments are there in UK as well which voted to exit the EU, which was anotherheavy blow for free trade. In this paper we look at what recenttrends in protectionism mean for the countries of South East Asia.
Thesecountries have generally relied on export of goods/services to drive theireconomies. Many of them don’t have the domestic markets that can support thesupport the level of production making international trade a necessity forthem. We will look at effect these tradepolicies have on businesses i.e.
what doors have closed which ones are stillopen. We will also discuss in detail the possibility of increased regionalco-operation to counter the effects of protectionism in the west.