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Read excerpts from the article “Freedom of trade, the rights of multinational corporations and the dilemma of the State: Reflecting upon the Summit of the Americas, once the smoke has cleared” by economist Jacques Parizeau
Question 1
In the section on the Canada-US Treaty, in the first line, it states “the American Congress became very protectionist.”
a) Explain, in general terms, the goal of protectionism. (2 points)
b) Describe the two main forms this trade strategy takes and the global consequences it brings about. (4 points)
Question 2
To answer the question, consult your textbook and the article “Freedom of trade, the rights of multinational corporations and the dilemma of the State: Reflecting upon the Summit of the Americas, once the smoke has cleared” by economist Jacques Parizeau (attachment).
When a country applies a protectionist policy, it may use several instruments. Describe three instruments that a country may use and how to apply each one.
Question 3  /15 points
Using each of the three instruments you referred to in Question 2, explain the consequences of the various protectionism instruments on:
 The consumer in the country.
 The local producer.
 The price of the protected goods.
Question 4  /10 points
To consult the article “Freedom of trade, the rights of multinational corporations and the dilemma of the State: Reflecting upon the Summit of the Americas, once the smoke has cleared” by economist Jacques Parizeau, open the attachment.
The text states: “When the American company Ethyl sued Canada on the basis of the NAFTA provisions, the awakening was brutal.” The Textbook also makes a reference to this company.
In light of the Ethyl case:
a) Give the positive and the negative aspects that come up for the host country when a multinational firm moves in. (6 points)
b) Explain how NAFTA treats a case such as the one involving the Ethyl Corporation. (4 points)

 

Sample Solution

The goal of protectionism is to safeguard domestic producers and industries from foreign competition. This can be done in various ways such as imposing tariffs on imports, setting quotas on goods or services imported into a country, providing subsidies to local businesses and/or enacting laws that limit the ability of multinational companies within a certain region (Carbaugh 2019). Such policies are typically employed when governments fear that too much foreign competition could lead to potential losses for their domestic market or weakened economic growth overall. Therefore by shielding national firms from outside forces it is believed that this will help preserve jobs, strengthen desired sectors and maintain higher wages for workers (Lipsey & Chrystal 2018). While these approaches may have been used more often in the past due to growing concerns about globalization today’s markets tend towards free trade agreements which allow for greater levels of global integration and cooperation between states instead.

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