03-12-2003 04:13									#1
	Protectionism Vs Free Trade (Historically) Enter the AD-FREE zone

This is currently discussed in the 'Raise tariffs on America' thread, but there are a couple of topics there and since I am not an economist, I would appreciate if someone would clarify this issue for me separately. I am interested how this developed historically.

Spiffor mentioned South Korea. Is it not true that the relative closeness of their market during their biggest growth had a positive effect on wealth of the country?

Also, from everything I ever read, USA were always one of the most protectionist countries in the world, the trend reversing only after WW II.

Is it true that most countries that are nowadays economic (industrial) giants and thus proponents of free trade, built up their power behind strong protectionism?

If so, how can someone argue against protectionism, especially in countries that aspire to industrialize, or those that are expiriencing a crisis?

	03-12-2003 04:21									#2
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Oh yeah, if anyone knows examples of countries that managed to industrialize under a free trade regime, I would also appreciate that.

And no, tourism is not an industry

	03-12-2003 04:23									#3
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Too bad a 5% change does a stab hit and is only possible every 10 years...

	03-12-2003 04:27									#4
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I am guessing this is a reference to Europa Universalis II or Victoria, none of which I have played.

How about real world?

	03-12-2003 10:33									#5
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Bump. This is a good question. A side question is why some countries with the highest per capita GDPs (US, Japan) have only a small part of their economy that is traded.

Last edited by DanS on 03-12-2003 at 10:39

	03-12-2003 10:44									#6
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I recemend high tariffs, lots of loans to build railroads and industries, and converting all of your POPs in recently madagascar into soldiers.

Sorry, couldn't resist.

	04-12-2003 01:59									#7
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quote: Oh yeah, if anyone knows examples of countries that managed to industrialize under a free trade regime, I would also appreciate that.

Well England for one. Though there is some debate whether it was truely free trade... it was more free trade than anywhere else at the least .

	04-12-2003 02:03									#8
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Free trade benefits the world leader. Before England was the industrial powerhouse of the 18th and 19th centuries, it was quite protectionist.

	04-12-2003 02:07									#9
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quote: Is it true that most countries that are nowadays economic (industrial) giants and thus proponents of free trade, built up their power behind strong protectionism?

I think so, but then I am no historian/economist either.

Would this be a reason to increase Tariffs to encourage industrial development?

You say tourism is not an industry, but what about a country that uses capital from tourism to build other industries under free trade?

	04-12-2003 02:10									#10
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I think a sound approach, after the creation of modern nationalism, is to consider each economy as "national" meaning looking out for its own benefit. That way concepts such as free trade or protectionism are easily interchanged according to each particular situation to ensure the benefit of the "national economy". So a nation can have free trade where it knows it suits it (it can overtake the competition or at least have a shot) or protectionist at other times when it knows it cannot compete (the recent steel tarrifs are a good example).

	04-12-2003 02:25									#11
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quote: I think a sound approach, after the creation of modern nationalism, is to consider each economy as "national" meaning looking out for its own benefit.

Problem being that this economic 'nationalism' may lead to other nationalism which just isn't good. It generally starts to lead to autarky (we can make everything for ourselves) which has a bad effect.

	04-12-2003 02:28									#12
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Never said anything different
Thanks for explaining to me what autarky means BTW

	04-12-2003 02:30									#13
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quote: Problem being that this economic 'nationalism' may lead to other nationalism which just isn't good.

The lack of it could be bad however; like what we're seeing in the EU, with the beitching and moaning over foreign politics and two ruling countries reaping all the benefit for allowing their economies to sag because of it.

	04-12-2003 02:33									#14
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Actually in economic terms the EU is a "national economy".

Also to dispell any potential confusion in regard to Imran's post: I said how things are best perceived as, not how "they should be or should not be".

	04-12-2003 02:57									#15
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quote: Originally posted by DanS Bump. This is a good question. A side question is why some countries with the highest per capita GDPs (US, Japan) have only a small part of their economy that is traded.

Nations with small economies have to export in large quantities to get the lower average cost with larger quanities. They also need to earn foreign exchange more than the larger nations.

	04-12-2003 03:13									#16
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Countries like Switzerland with a much higher GDP per capita than either US or Japan (and much more evenly distributed), actually only second in the world to Luxembourg, indeed have traditionally had trade surpluses but also very large domestic savings.

	04-12-2003 03:13									#17
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quote: Originally posted by Imran Siddiqui quote: Oh yeah, if anyone knows examples of countries that managed to industrialize under a free trade regime, I would also appreciate that. Well England for one. Though there is some debate whether it was truely free trade... it was more free trade than anywhere else at the least .

England didn't start lowering trade barriers until the 1840s, and only on manufactured goods. Smart move since they had a comparative advantage in manufactured goods and access to cheap raw materials. They kept their tariffs on goods that they didn't have a comparative advantage in, like wine, however.

	04-12-2003 03:17									#18
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quote: Originally posted by paiktis22 Countries like Switzerland with a much higher GDP per capita than either US or Japan (and much more evenly distributed), actually only second in the world to Luxembourg, indeed have traditionally had trade surpluses but also very large domestic savings.

Domestic savings and trade surpluses go hand in hand.

	04-12-2003 03:29									#19
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quote: Originally posted by Kidicious England didn't start lowering trade barriers until the 1840s, and only on manufactured goods.

That be the repeal of the corn laws in 1846 - which were against foreign agricultural produce, not manufactured goods.


International trade/globalization seems to take off only when there is one dominant leader in the world economy, presumably this is because it can impose one set of rules on the game.
This is the main reason why I think that the current tide of increasing trade/globalization is at it's high point (as the US cannot dominate the EU anymore)

	04-12-2003 03:31									#20
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quote: Originally posted by Kidicious Domestic savings and trade surpluses go hand in hand.

Sorry wasn't clear on what you meant by "earning foreign exchanges". You obviously meant foreign capital. (blame it in the language barrier or me )

	04-12-2003 03:35									#21
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quote: Originally posted by el freako That be the repeal of the corn laws in 1846 - which were against foreign agricultural produce, not manufactured goods.

Right. They had already lowered tariffs on manufactured goods. But they still had tariffs on wine, right?

	04-12-2003 03:38									#22
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quote: Originally posted by paiktis22 Sorry wasn't clear on what you meant by "earning foreign exchanges". You obviously meant foreign capital. (blame it in the language barrier or me )

No problem. Your language barrier isn't so bad anymore.

A trade surplus naturally results in domestic savings. The exporters recieve foreign currency and they trade that for their own currency and the nation earns foreign exchange.

	04-12-2003 03:44									#23
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quote: Well England for one. Though there is some debate whether it was truely free trade... it was more free trade than anywhere else at the least .

Actually, I just read this pretty interesting article that France had a much lower tariff rate than England for most of the 19th century, and England caught up only towards the end, contrary to orthodox thought.

quote: That be the repeal of the corn laws in 1846 - which were against foreign agricultural produce, not manufactured goods.

But tariffs against manufactured goods tended to also drop in this period, and quite substantially in the decades following the repeal of the corn laws.

	04-12-2003 03:44									#24
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Kidicious,
However that isn't absolut I think. The foreign capital/exchange can be used to invest rather than keep it in a savings account as many Swiss do. Which is what I mean by domestic savings, large amounts of money which don't leave the country and are not invested. The Swiss economy is really interesting in regards to having almost no growth, no wish for reformation and yet be so succesful. Of course that might have something to do with the banking secrecy laws A constant thorn on EU - Swiss relations.

	04-12-2003 03:47									#25
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Here's the graph Ramo.

Attachment: nyefreetrade.bmp
This has been downloaded 6 time(s).

	04-12-2003 03:50									#26
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Thanks.

	04-12-2003 03:53									#27
	Enter the AD-FREE zone

quote: Originally posted by paiktis22 Kidicious, However that isn't absolut I think. The foreign capital/exchange can be used to invest rather than keep it in a savings account as many Swiss do. Which is what I mean by domestic savings, large amounts of money which don't leave the country and are not invested. The Swiss economy is really interesting in regards to having almost no growth, no wish for reformation and yet be so succesful. Of course that might have something to do with the banking secrecy laws A constant thorn on EU - Swiss relations.

The savings from exports is traded, saved, and borrowed, but is eventually invested in the nation that imported the goods.

	04-12-2003 03:56									#28
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Here's the article.

The Myth of Free-Trade Britain

	04-12-2003 04:01									#29
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England did not industrialize under free trade. They industrialized under NO trade via Mercantilism. (I do think trade is good, but not "free" trade). Of course England also started the only long term colonization effort in the new world so they had in effect another country to "trade" manufactured goods and resources with.

	04-12-2003 04:06									#30
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quote: Originally posted by paiktis22 I think a sound approach, after the creation of modern nationalism, is to consider each economy as "national" meaning looking out for its own benefit. That way concepts such as free trade or protectionism are easily interchanged according to each particular situation to ensure the benefit of the "national economy". So a nation can have free trade where it knows it suits it (it can overtake the competition or at least have a shot) or protectionist at other times when it knows it cannot compete (the recent steel tarrifs are a good example).

I agree

at times protectinoism is best, at times free trade is

the always free trade groups are right, wealth almost always increases (like entropy)

but just as with entropy just because total wealth is increasing, does not mean that the wealth of a particular country is increasing

and I think that there is no reason for one country to pauper itself for another country

the whole point of a nation is to look after it's own citizens interests, not the interests of the citizens of other countries

Jon Miller