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Transcript
- 00:00
Finance Allah Shmoop What is protectionist This video is brought
- 00:08
to you by our friends at Trojan Remember Trojan protection
- 00:11
against sleepless nights A protectionist policy and essence tries to
- 00:16
financially proto checked the businesses of the country while a
- 00:20
protectionist policies one established by the local economy or country
Full Transcript
- 00:24
with the aim of financially protecting the businesses with in
- 00:28
that country Example it is protectionist policy to charge fifty
- 00:34
dollars a bottle import tax against French wines being imported
- 00:39
into California where local Napa wine people have a tremendous
- 00:43
lobby and for some strange reason are afraid of competing
- 00:46
mano a mano or a rather bottle Oh bottle o
- 00:50
We're local Napa people confident that their wine was a
- 00:53
better product than that of the French Then they wouldn't
- 00:56
bother pushing the government tohave taxes against them Damn foreigners
- 01:00
exporting their swill Well this process sounds rational but in
- 01:03
practice the game is oh so never simple For starters
- 01:06
many countries actively back They're exporting companies in a weird
- 01:10
kind of economic war called dumping which has nothing to
- 01:13
do with either countries Bathroom habits The process of dumping
- 01:16
usually involves high fixed costs high sunk costs in high
- 01:20
capital expenditure industries Plus well then there's the manufacture of
- 01:25
semiconductors Yeah such that a country with easy access to
- 01:28
very cheap labor cheap capital and no regard to environmental
- 01:31
pollution Well they can match with arsenic or gallium arsenide
- 01:35
Onda silicon semiconductors at prices dramatically less than comparable builds
- 01:40
in the United States with the hope of either corrupting
- 01:43
those companies are essentially buying market share so that they
- 01:46
become a major player around the world Will the competitive
- 01:49
situation then demands all kinds of moral and ethical questions
- 01:53
revolving around what the notion of quote fair unquote trade
- 01:56
means Like you know when it's not about love and
- 01:59
war Well the same friction gets laid in a protectionist
- 02:02
policy where rather than imposing taxes are import duties from
- 02:06
foreign distributors local countries place a quota on the quantity
- 02:10
or volume of product allowed into the country From that
- 02:13
interloper at the extreme end there's a complete embargo blocking
- 02:17
all importing of that good strategically politicians aim protectionist policies
- 02:23
domestic industries because in essence in the short run each
- 02:27
goods sold to a foreign distributor exporting their products into
- 02:31
the U S Takes away some value from a domestic
- 02:35
taxpaying producer Right So if we bought all our cars
- 02:38
from Japanese and Korean producers and bought none of them
- 02:41
from American producers well all our dough would be shit
- 02:45
doubt overseas right Well Additionally balance of trade then becomes
- 02:48
an issue If the U S Could import a hundred
- 02:49
percent of everything it uses at half the price at
- 02:52
which it manufacturers that locally well life would be grand
- 02:55
for Americans living large on the Macy's White Flower Day
- 02:58
half off sale for about two quarters or a male
- 03:00
maybe half a year right Think about it If you
- 03:03
could buy that gap shirt instead of paying forty eight
- 03:06
dollars for the rugby style thing you could buy it
- 03:08
for twenty four dollars for the exact same shirt Well
- 03:11
why wouldn't you after that our existing industries would essentially
- 03:15
evaporate is meaningful economic entities and with no revenues coming
- 03:19
to them from sales Well there'd be little money to
- 03:21
send across our borders to buy things like oil and
- 03:24
Japanese trucks Okay well adding yet more complexity to the
- 03:27
notion of protectionism This black and white picture of importing
- 03:30
and exporting one hundred percent of any given good is
- 03:32
usually incomplete That is Mercedes makes its engines in Germany
- 03:36
but stamps its bodies in the U S While using
- 03:39
tires from Korea France and Japan and windshield wipers and
- 03:43
other accessories from other manufacturers in nonunion red states in
- 03:47
America and from Latin America They're all assembled in North
- 03:50
Carolina So how do you even begin to calculate what
- 03:53
a protectionist policy would do in this very cloudy vague
- 03:57
sense of who owns what who benefits from what where
- 04:00
and how much protectionist policy would do to help her
- 04:03
harm the global balance the power The broader goal here
- 04:05
and general notion is that the world receives a quote
- 04:07
peace dividend unquote when company's heir not at war in
- 04:11
this unhealthy way consumer's benefit when companies simply compete to
- 04:15
deliver higher and higher quality product for incrementally better value
- 04:18
to the end user If protectionism gets in the way
- 04:20
of that liquid flow of Darwinian economic competition well it
- 04:23
just adds friction where it really isn't needed And it's
- 04:26
simply inefficient So to recap protectionism stopping the flow bad
- 04:31
but the's thing stopping the flow good
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