The mistaken path of protectionist policies.

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The mistaken path of protectionist policies.

In the current world context, we are witnessing the use of mistaken entirely commercial mechanisms by essential countries. The main one is protectionism because instead of protecting some segment of the country ends up penalizing the country as a whole.
In a simplified way, let’s see how this happens. There are other side effects in the application of protectionism, but let’s comment on one of them.
When Country A implements a policy of importing products or inputs from Country B, this means that its domestic production of a given product does not serve internal consumers, either concerning quality or prices.
When Country A imposes surcharges on these products from Country B, there generally be two types of reactions and effects:
The first is that Country B also overtaxes products from Country A. This hurt sectors of Country A that produce products and achieve advantageous margins in their sales to Country B. Obviously with surcharges, these sectors of Country A be severely punished in their business by the actions of their government.
The second adverse effect is on the consumers in Country A and the economy of the respective country. It is because consumers instead have to buy products from Country B, as they did before, with a cost and quality that suits their taste, they have to change their behavior due to surcharges and respectively the increase in the final price.
This process can lead consumers to purchase from their own country, these products not necessarily of the same quality, but certainly with a higher price. Of course, if they were not, they would not be imported from Country B.
The central fact is that in practicing protectionism, Country A harms domestic producers of other products that be penalized by Country B and harms consumers in their country, who pay more for the same product without necessarily the same quality.
Assuming consumers accept to buy more expensive internally, this action pushes inflation that forces the Central Bank to raise its interest rates to contain the inflationary process. This increase in interest rates make it difficult for local consumers to purchase other financed products and will further increase the country’s public debt.
Entirely just, we have seen that abrupt unilateral decisions are not suitable for anyone. Because “all action generates a reaction.” In that case, everyone loses in both countries. So the best route always the dialogue and the negotiating table.
The world bodies responsible for this have established trade rules after much debate. There is no point in ignoring everything that built with much sacrifice

By | 2018-08-12T09:43:06+00:00 agosto 12th, 2018|Quick News Brazil, Quick News China|0 Comments