The Obama administration is visibly tough on outsourcing. The French President is blatantly threatening the Eastern Europe to repatriate car-manufacturing operations to France. The British Prime Minister is vying for reserving the British jobs for the locals. The residents of the developed world, pressed by the recession, think that protectionism will secure their interest. However, the fact is that it will only deepen the crises rampant in the international trade.
Protectionism is the policy of restricting trade between the nations by resorting to restrictive regulations by the government of a state to discourage imports and to prevent the entry of foreign players in the local markets. These restrictive regulations may be of various types. The governments may impose tariffs that are taxes on the imported goods, thereby discouraging the importers and making the foreign goods costlier in the local markets. The other way is to resort quotas that is to limit the quantity of foreign goods, thereby increasing their price. Administrative rules are one other way of curtailing imports. The nations may opt for anti-dumping laws to reduce the entry of cheap foreign imports. A direct subsidy or export subsidy that is extending monetary support to the local industries and exporters is one other way of supporting protectionism. As far as monetary measures are concerned, the developed nations can reduce the price of their currencies by exchange rate manipulations, thereby making the imports dearer.
All this protectionism is against the spirit of free trade, which allows the traders to carry on their business activities without any government interference or regulations. The policy of protectionism will not only weaken the local industries in the developed nations by making them less competitive, but will also jeopardize the economies of the developing nations by disabling them from taking advantage of