The world has become more interconnected on several levels, particularly on the economic front. In 1970, imports and exports accounted for 11% of U.S. GDP, up from 32% today. However, because of its size, the United States is less internationally connected than most countries. According to the World Bank, 97% of Botswana`s economic activity is trade-related. In this chapter, it is trade policy - the laws and strategies that a country uses to regulate international trade. This is not without controversy. Remember international trade that tariffs are imposed on imported goods and services. They increase imports for consumers and discourage imports. For example, in recent years, large flat-screen televisions imported from China have faced a 5% tariff.
The impact of protectionism on foreign producers and consumers is complex. When an import quota is used to impose partial protectionism, Brazilian sugar producers receive a lower price for the sugar they sell in Brazil - but a higher price for sugar that they can export to the United States. Note that part of the protection burden paid by domestic consumers falls into the hands of foreign producers. Brazilian sugar consumers seem to benefit from American protectionism because it reduces the price of the sugar they pay. On the other hand, at least some of these Brazilian sugar consumers also work as sugar producers, which reduces their incomes and jobs through protectionism. Moreover, if trade between countries were to decline, Brazilian consumers would lack better prices for imported products that are not included in our example of sugar protectionism in our domestic market. Low-income countries can compete for jobs by lowering their environmental standards to attract businesses to their countries. This could lead to a competitive reduction in regulation, resulting in greater environmental damage.
While environmental management entails costs for businesses, it is tiny compared to other costs such as work and adequate infrastructure. It is also expensive for businesses to be away from their customers, which is many low-income countries. The WTO allows countries to set their own consumer safety standards. The country`s ability to protect its own industries from competition is limited. If consumers are the biggest losers in trade, why can`t they resist? The quick answer is because it is easier to organize a small group of people around a narrow interest compared to a large group that has diffuse interests. It`s a matter of business theory.