Essay Sample: Can a Protectionist Trade Policy Offset Automation to Create More Jobs?

The overall job rates in the United States have been on the decline for a long period, and the ones affected mostly by this decline are men. The country has been facing an aggravating version of common setbacks whereby the manufacturing jobs have disappeared and have failed to be replaced by anything. There has always been a debate on whether the robots or automation and a protectionist trade policy are to blame for this decline in employment opportunities. Industrialized countries have experienced labor shedding especially in their manufacturing industries for decades, and it started before globalization kicked in. Both robots and trade have had a great impact on job loss, but they are both relatively important, and their extent of the blame for each is different. Though the trade has little to do with the loss of jobs, the similarities between the perennial surplus in Germany and the deficit in the US is much greater than the differences. Production structures and employment structures have a great change due to the opening of economies because of the overall growth of trade as a result of global and regional liberalization, and before the global financial crisis (Georgiadis and Grab, 2016). Theoretically, countries with additional open trade are likely to specialize more in production. This in return makes use of their capital resources, capital, and labor.

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In the real sense, both automation and trade can play a role in the reduction of job opportunities. The two cannot be separated because attendant jobs and production growth that are automation driven maybe an unavoidable part of the economic change and this can also be accelerated by trade liberalization. The rich economies like the US and China with high skilled labor can respond to a greater production if they specialize in the higher valued goods. But with automation, the production can be increased just like the car industry in the US which makes more vehicles and exports finished products in China. Therefore, a protectionist trade policy may not necessarily offset automation to create more jobs. Consequently, if what helped automation along the way was the trade, then restricting it will not automatically wind automation back even if what trade was what eroded the manufacturing jobs. The effect would be to delay automation further, but that is likely to come with an additional cost. This also means that exporting manufacturing goods to a country that uses cost-effective techniques will be impossible. Protectionism is likely to restrict imports, but it will also hold back on the exports, meaning a country will lose out on advantages that come with foreign exchange. The costs of also imposing the protectionist trade policy be more costly than the benefits it will bring locally.

Reasons Why Tariffs may do more harm than Good in the Tariff Imposing Countries

Imposing tariffs on both exports and imports might cause a wider damage on a countrys economy at home. Tariffs are used by countries to create barriers to trade between countries (Bagwell and Staiger, 2016). Most countries are allowed by the World Trade Organization to apply tariffs on imports of products that have been subsidized. Other policies not clearly defined by WTO which includes accompanying macro economic distortions and undervaluation of a currency could have an overall effect when export prices are pushed down which may lead to the trade partners crying foul. Whatever prompts this, political dialogues perennial focus is on the unilateral action of a country to get tough with their partners in trade whose export prices are alleged to be low. A leading example is the United States Omnibus Trade and Competitiveness Act of 1988. The Act followed a significant period of rising US deficits and dollar strength and other initiatives including a proposal to permit industries to push for countervailing duties against the suspected currency manipulators. Such pressures are noticeable not only in the United States, but in other countries as well. These pressures are currently taking a toll on international trade. The problem with this kind of approach is that it creates room for industry lobbying that is based on a criterion that is less objective as compared to a measurable financial subsidy. Besides, this countervailing protection might encourage the trade partners to retaliate by imposing tariffs that lead to destructive trade wars.

Another disadvantage of imposing tariffs on trade partners is that they will reduce industry output, employment, and investments in the whole economy, even if they give some relief to workers and industries that compete directly with the imports affected by the tariffs (Bagwell and Staiger, 2016). These destructive effects follow even if the countries affected do not retaliate, and if they retaliate the outcomes would be worse. The question most financiers ask is why the shift in demand for domestically produced goods and a rise in prices of competing imports cannot raise employment and output and deliver an upward pressure on inflation when a tariff in applied. Tariffs cannot help in such a case, and this was pointed out by Robert Mundell, a Nobel Memorial Prize Economic Science 1999 winner. The major reason given by Mundell is that a tariff has overall negative effects as it promises to improve the importing countrys balance of payment position. The tariffs also cause the strengthening of the domestic currency in the exchange market which in turn reduces the employment and the Gross Domestic Product (GDP). The overall effect is that it exacerbates the trade deficit. The outcome of this is harsh when the policy interest rate given by central bank is near zero or at zero. In this effect, the central bank is forced to use a monetary policy that will ensure that the contractionary effect caused by the tariff is offset.

Justification for Imposing Anti-dumping Duties

Dumping is when business lowers its selling price of exports to gain an unfair share of the global market. This means dropping the prices below what the company would sell for in the domestic market. In some cases, the business may push the prices lower than its cost of production. For these reasons, the Trump Administration warned several countries including China and Japan among other countries that it would impose tariffs on its exports (Bagwell and Staiger, 2016). However, these tariffs are only effective in the country if they are passed by the US Commerce Department with a proper proof by the government that dumping a particular product injures the economy of the country. Anti-dumping duties are tariffs imposed on import goods that the government believes are priced below the market value. Countries put such protectionist tariffs for various reasons. Countries that impose the anti-dumping tariffs do so to ensure a level ground is put in place to ensure industry players enjoy a fair and true competition. When the tariff is imposed, a country can probe whether the domestic industry has been affected negatively by a surge in imports that are below costs. Once they determine the negative effect, the country places a counter measure by imposing duties according to the guidelines given by the World Trade Organization. This measure is not put in place to restrict imports or even cause an unwarranted increase in the prices of the products.

A country exposed to dumping is likely to benefit from the low prices on products. The consumers of those products in that country will benefit by having a surplus of products that they can easily access at a lower price. These benefits are usually lost when the importing country imposes an anti-dumping tariff on these low priced import goods. When the duties are levied, the products end up with similar prices in both the foreign and domestic market. This ensures that there is fair play for both trade partners. The anti-dumping tariffs are also imposed by countries because the problems that are brought about by dumping are very expensive to maintain. To put a competitor out of business, it might take several years of exporting cheap products to achieve this. The costs of subsidies are also likely to add to the export sovereign debt of a country. Trade restrictions brought about when the trading partner retaliates is another setback that is brought about by dumping. Countries are allowed by the policies of World Trade Organization to impose tariffs and restrictions that will counteract dumping. Censures given by international trade organizations like the European Union and the World Trade Organization can force countries to impose anti-dumping tariffs on their imports.

The Winners and Losers in President Trumps Potential Trade War

The Trumps trade war is likely to attract winner and losers at the same time. The likely losers of this trade war are those communities within the giant metropolitan areas that are deeply integrated into the global markets. Proportionately, the greatest losers in a trade war are midsized and small cities. This is because these cities are dependent on exports of energy products and manufactured goods. A distinction between the communities with a proportional and absolute stake in accessing the global markets frames the political risk when Trump increases import barriers and withdraws from the countries led efforts to trade in open markets around the world. Consequently, if Trump squeezes exports and reduces trade flows, the ultimate losers will not only be the giant metropolitan cities but all the cities that supported Hillary Clinton. The smaller areas that provided the core for Trumps support are also likely to lose out in this trade war.

Mostly, protectionism is a relatively unambiguous threat for the blue-leaning metropolitan areas. It is clearly a negative move in those places because the areas benefit from tourism and selling in the global markets. This means that the protectionist tariff policies if reinforced can stanch these flaws. For smaller communities that were the center of the foundation of Trumps coalition, they would welcome these policies on the belief that it will force manufacturers building new industries abroad to consider re-investing in the country. The downsize of these smaller communities is less visible, but with potentially more consequences. One of the consequences will be experienced if other nations retaliate as this will cost the local economy as the country will have minimal global markets to sell their produce. The motivation behind introducing the new policy by the new administration is that more production will concentrate in these areas as a resulting of closing the country off. But, according to economists, this requires a view of trade that is zero-sum. In the case of any retaliatory measures by other nations, and then the extensive export industries begin seeing changes in the economy. For example, a protectionist policy might save jobs in the manufacturing industries, but they could also mean that workers are not hired by another employer or even lays off the ones they have because of the contrast in the export markets. The biggest winners of this trade war are likely to be the companies that generate their revenues by selling in the domestic markets. An increase in domestic spending would automatically give a boost to these companies than those that rely more on foreign markets. However, it is difficult for officials to keep up with the broader perspective when the losers are more than the beneficiaries.

Estimated Consequences of Brexit for UK Trade

The assumption made in this analysis is that the optimistic scenario is that a post-Bretix world, the United Kingdoms trade relations with the European Union are those enjoyed by Norway which has a free trade agreement with EU, is a member of the single market and adopts regulation...