Protectionism or free trade? The great debate

The two major models in which economic policy can be managed, protectionism or free trade, generate intense debate among economists, technicians, or policymakers.

Protectionism, based on the imposition of trade barriers and import quotas, usually applies the following measures:

  • Providing subsidies to domestic companies.
  • Imposing tariffs on foreign goods and services.
  • Prohibiting the importation of goods in the country’s most important sectors.
  • Preventing foreign investors from taking control of a company’s shares.
  • Establishing patents and licenses that limit the transfer of scientific and technological knowledge.

China, the United States (during the Trump era), Brazil (in sectors such as the automotive industry or technology), India, and the European Union have applied or are applying certain protectionist measures in their economies.

On the other hand, we have free trade. This allows for a liberation of the market, so that it is only governed by two variables, supply and demand. Furthermore, there are no inconveniences in international import and export, so each company could operate with total freedom.

For Stock Logistic, an international logistics company, it’s a factor to consider what type of economy each continent or country they offer their services in has, from China to Colombia. They take care of every detail of the process to provide the best possible customer service..

Protectionism vs. free trade

As in any division of opinions, each one has its strengths and weaknesses.

On one hand, we have protectionism, which has the following advantages:

  • Regional security: protects the country’s growing industry.
  • National trade: strengthens the local economy.
  • Market stability: prevents trade imbalances.
  • Support for SMEs: benefits the country’s weaker economic sectors.
  • Self-sufficiency: independent and self-sustaining economy.

On the other hand, there is free trade, which provides these benefits:

  • It generates interdependence: countries strengthen trade ties, resulting in fewer conflicts.
  • Promotes comparative advantage: encourages other countries to improve their products.
  • Does not distort trade: allows for the emergence of free trade dynamics.
  • Promotes economic growth: benefits those who trade freely with each other.
  • Benefits society as a whole: improves the quality of products and services, as there is constant competition.

Despite the advantages or disadvantages that each country may have in the import and export of goods, Stock Logistic offers industry solutions services. It’s a way the company provides tailored measures to each product, helping to offset the handicap of each location.

The origin of protectionism

One of the first instances in which a law was applied that modified the entire economy of a country was in the 14th century, by order of King Edward III of England.

The monarch decided to ban the import of woolen fabrics in Great Britain, seeking to stimulate the local textile industry, resulting in the country becoming the world’s largest producer of wool.

Some countries during the Industrial Revolution (18th century) also adopted protectionist policies to protect their emerging industries.