ECON 101 Lecture Notes - Lecture 13: Government Failure, Protectionism, World Trade Organization
Document Summary
Anti- globalisation: free trade and foreign investment destroys the distinctive cultures of many countries. Globalisation has also allowed multinational corporations to relocate factories from high- income countries to low- income countries. These new factories (e. g. in pakistan, indonesia or india) pay much lower wages than those in high- income countries and often do not meet the environmental or safety regulations that are imposed in high- income countries. Protectionism: the use of trade barriers to shield domestic firms from foreign competition. It is supported based on the following arguments: Dumping: selling a product for a price below its cost of production, usually referred to in the context of when a country sells a product on international markets for a price below its cost of production. The wto allows countries to use tariffs in cases of dumping. Radical environmentalism: an argument put forward by environmental groups in favour of protection suggest that trade restrictions be put in place to reduce environmental damage.
