The paper "Protection versus Free Trade" is a great example of a micro and macroeconomic essay. Free trade refers to government policy where equality in treatment is accorded between goods and services that are exported or imported into a country. On the other hand, the government can choose to adopt trade protectionism. Under protectionism, governments make deliberate efforts to promote exports or curtail imports (Dunkely 2003, 34). Trade protection is achieved through various ways such as subsidies and other barriers to trade such imposing quotas as well as import duty.
In Australia, the debate on free trade and protectionism has been in the news in the recent past. This has been prompted by the notice issued by General Motors, through Holden, its local subsidiary, to cease production of motor vehicles in Australia by 2017. The decision by the giant automaker has been informed to a large extent by the prevailing conditions in Australia's auto market. The essay examines whether it is right for the Australian government to continue subsidizing the local car industry (Taylor & Bennett 2013, 43). Discussion 1. The debate has been rife as to whether the Australian government needs to subsidize the local motor vehicle manufacturers.
Whereas differences in opinion lie as to whether subsidies should continue or not, it should not be lost the fact that the Australian auto industry indeed requires subsidies to survive. One reason why subsidies should in fact be increased rather than scrapped away is the fact that almost all vehicle manufacturers all over the world do receive subsidies of some sort in the making of their vehicles. The subsidies for vehicle manufacturers take different forms in different countries (Taylor & Bennett 2013, 2).
The subsidies could be through the injection of the relevant funds through tariffs or in kind. Some countries use currency manipulation to maintain a competitive advantage for their motor vehicle manufacturers. There are still many other ways through which governments can assist motor vehicle manufacturers to ensure that they gain an edge over their competitors and this would still amount to subsidies. It is a fact that other countries offer more subsidies than Australia does.
ABC 2013, Car industry subsidies worthwhile, study concludes. ABC.
Dunkley, G., 2003, Free trade: myth, reality, and alternatives. New York, Zed Books.
Taylor, R & Bennett, J, 2013, GM Hits End of the Road in Australia, The Wall Street Journal.
The Journal Gazette, 2013, GM to stop making car in Australia by 2017, Associated Press.