International trade is a key component in the global economy today. It is further burgeoning through the rise of organizations like the WTO and agreements such as NAFTA which open up free trade, allowing goods to move freely and thereby aiding consumers in various countries in terms of prices and quality. It also spawns healthy competition in the local industries. However, when things in the economy begin to go awry, the first thing that many policy makers pursue is to enact trade restrictions. This can lead to a breakdown in competition and can lead to adverse effects in the local and international market.
In theory every country has a comparative advantage in the production of some products. This means that the labor and capital resources available in the reason are more productive when focused towards a particular industry and thus are able to be produce that product better as a result (Robert 1999). In the case of the textile industry, Pakistan enjoys a comparative advantage as it has many cotton fields, providing it direct access to the raw material for the industry. It further has been operating in that industry for a long time which has spawned a lot of trained workforce relating to that industry in the country.
Therefore, law of comparative advantage dictates that it should produce textile materials. Similarly, the US industry has been producing software products in the Silicon Valley for a long time. So, with respect to these two countries, it is most efficient in the economic system if Pakistan devotes its resources towards textile production and the US to software production and they both trade with each other for the goods. When trade restrictions are brought into play, the best allocation of resources that the law of comparative advantage specifies ceases to function as it should as it requires free trade (Younkins 2002).
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These restrictions result in the consumers having to buy the same materials that were gotten at lower prices and with better quality from other countries at higher prices from the local industry. It further may result in a drop in quality. Local employees benefit however as local industry may be able to survive in such artificial conditions and result in more jobs and possibly higher wages for workers. Thus it results in an ethical dilemma about whether these restrictions should be put in place, helping the workers, or removed to help the consumers?
Considering the issue from an ethical stand point, there are different perspectives to consider. Ethics of care dictates that both the worker and the consumer should be looked after and protected, with one’s rights not being compromised for the other. However, ethics of justice dictates that the market is opened up and the best performer survives. This is also supported from a utilitarian perspective as by opening up the market, local industry may be able to reorient itself to meets its position of comparative advantage in a few years, helping the workers and the economy in the long run.
Thus trade restrictions are not ethical and should not be adopted as a possible measure for protecting local industry.
Howse, Robert (1999). The regulation of international trade. Routledge. Younkins, Edward (2002). Trade Barriers Are Immoral and Destructive of Economic Well-Being. Retrieved June 18, 2009, from Rebirth of Reason Web site: http://rebirthofreason. com/Articles/Younkins/Trade_Barriers_Are_Immoral_and_Destructive_of_Economic_Well-Being. shtml
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