Prebisch's New Theory of Protection Trade

Introduction:

Free trade has been a contentious issue since the eighteenth century, when Adam Smith famously proposed it as a source of economic growth and transformation. However, the debate has shifted since then and the concept of protectionism has gained more acceptance. This essay will examine the arguments for the idea of protectionism and the views of its main proponent, David Ricardo Platt.

Summary of David Ricardo Platts Protectionist Trade Theory:

David Ricardo Platt was a British economic thinker who advanced the theory of protectionism. In his book, On Political Economy and Taxation (1819), Platt outlined his views on trade. He argued that trade should be regulated in such a way that it benefits the nation from whom goods are being imported. This would include tariffs, or taxes, imposed on incoming goods and subsidies for domestically produced goods. Platt argued that tariffs could be used to support the development of domestic industries, to protect them from foreign competition, and to allow for the development of the domestic infrastructure.

Further, Platt argued that protectionism should be used as a strategic tool for national defense. Protectionism would limit the capabilities of hostile nations to impose economic sanctions on the home nation, by reducing the trade of certain items from those nations. Platt also argued that free trade should only be undertaken with friendly nations, in order to support the economic health of the home nation. Additionally, he argued that there should be limitations placed on the size of industries, so that they could not become too large and overpower their rivals. He further argued that in order for a nation to truly experience economic growth and transformation, a balance must be struck between protectionism and free trade.

Analysis of Protectionist Trade Theory:

David Ricardo Platts views have had a significant impact on the economic thinking of the past two centuries. His theory of protectionism has received both positive and negative reactions. Supporters of protectionism point to the importance of protecting domestic industries from unfair competition from abroad, as well as the need to ensure that overseas nations do not gain a disproportionate share of the wealth from trading. Further, Platts view of imposing tariffs to support the infrastructure and defense of the home nation are seen as important steps to prevent hostile nations from exploiting the home nation in trade.

On the other hand, opponents of protectionism point to the negative consequences that can result from tariffs, such as increased costs for consumers, reduced efficiency of production, distorted market signals, and unfair advantages for certain firms or industries. Further, opponents argue that free trade should be encouraged to benefit from the greater efficiency of a global market, as well as to promote broader economic stability and prosperity.

Conclusion:

To conclude, the debate over protectionism and free trade continues to be a contentious one, and the views of David Ricardo Platt have been influential in shaping the discourse. Supporters of protectionism point to the need to protect domestic industries and ensure a balance between protectionism and free trade, while opponents point to the potential negative consequences of protectionism. Ultimately, the debate over protectionism and free trade is an important one that will likely remain unresolved in the near future.

Adam Smith is one of the most important economists in history, and his theory of free trade was born out of his notion that economic exchange between countries would result in increased wealth, both in terms of economic production and quality of life. However, as Smith recognized, this exchange could be disrupted as one country could try to take advantage of another, effectively preventing the other nation’s market from growing. To protect against this, Smith argued for the establishment of a new type of trade policy. This policy, known as Protective Trade, sought to protect each nation from the other’s interference.

The idea of Protective Trade was first put into practice in 1789, when Britain and France signed the Convention of Amiens. Through this agreement, both countries agreed to protect each other’s vital economic interests and production of goods. This protection allowed France and Britain to participate in world trade without worrying about competition or unfair practices.

Other countries quickly followed suit and developed versions of Protective Trade that met their needs. The United States in particular developed its own policy of Protective Trade in the 19th century. Tariffs, or taxes, were placed on imported goods as a way of protecting domestic products from foreign competition. This allowed the US economy to remain strong and independent even during periods of world instability.

Protective Trade has seen a resurgence in recent years as countries have become increasingly globalized and economically integrated. Nations such as China, Japan, and Germany have all employed their own version of Protective Trade, often through the implementation of tariffs or other restrictions on the importation of goods.

Although the concept of Protective Trade dates back centuries, Adam Smith’s original theory is just as relevant today as it was in the eighteenth century. It is a tool that countries around the world can use to ensure that they are not taken advantage of by stronger economies, while allowing them to still participate in the global economy. As such, it remains a cornerstone of international economic policy today.