Free Trade vs. Protectionism 

There should be no debate of Free Trade vs Protectionism. It's actually really simple: Free market and protectionism are merely instruments to be used at different stages of industrial development. When your important industries are small, you protect them; that's how the world powers have achieved economic welfare: With hard protectionism of key industries at the beginning or whenever is necessary (if the Chinese become clearly more efficient, for example, in the case of the US). And when your industry is strong, you peddle the free market as the key to your success to anyone naive or ignorant enough to believe it, so they open their borders for your industry to devour theirs, thereby letting them forever stuck in the 3rd world. In any case, uncontrolled capitalism tends to reward being first in exploiting the initial lack of regulation (by scamming, underdelivering, and putting the worker and the consumer at risk, etc.), and since they got more opportunities to get more money in unethical ways, they end up with more money they can re-invest to acquire more capital. The above means that capitalism tends to form one oligopoly per industry, and when an oligopoly arises, it can: - Uphold ridiculous patents that stifle innovation. - Lobby for increased domestic regulation so other companies can't reach them. - Lobby for increased fines that they can cushion but would otherwise destroy startups. - Bribe authorities and mainstream media to invert reality when they put the environment, their workers or the consumer at risk. Oligopolies can also agree, explicitly or tacitly, to deliver inferior quality (look at what happened with the long-lasting light bulbs), and can get away with scamming the consumer, subtly or not, because the consumer has little or no other choice. Remember: The purpose of a company is not to give you better quality for the lowest price, it's to make money; and if they can get away with scamming, underdelivering, exploiting, putting your health at risk, etc. THEY WILL. Also, as people have said elsewhere in these comments, if you receive subsidies or if the government is your customer, you're not really playing the game of the free market.

Indians on their way to storm the comment section (there was a rupee in the thumbnail)

Free Trade is the outsourcing of labor to the lowest cost. The 'cheaper good improves our standard of living', really means 'instead of using slaves here at home, we'll use slaves in another country on the other side of the planet.'

I don't think Brexit was about protectionism of British business, more about exiting the protectionism of the EU (the customs union). The UK still seeks FTAs from countries around the world, and still has one with the EU.

One thing that we've seen in protectionist policies, is that protected industries raise prices to match the foreign prices. I'm looking at you US steel industry 😒

There's one thing my country does well: During harvest of a certain domestic fruit/vegetable, they raise the tariff of cet imported vegetable/fruit to make it cheaper to buy the domestic ones, which I personally find a good thing to pressure the citizens buy local fruits/vegetables.

Love these bite size bits of information videos

I don't think free trade can work unless every country does it. Like, if a US company is competing with a Chinese company, but the Chinese government bolsters the company based it it's borders, that company has a major advantage in the market. Also, is it 'free trade' if the government is a customer of a company? If the US only buys chips from Intel, then Intel has a HUGE market advantage. Unless the government produces all materials in-house, using proprietary manufacturing, they'll always be handing someone a leg up, to mix my limb-based metaphors.

Professor Dave does a good job of explaining, but I think there are key omissions. One effect of trade is often a race to the bottom as companies compete on price - this generally means a progressive decrease in quality -- and the consumer isn't the winner. Another major flaw is is how ecomonic health (or 'progress') is measured. GDP is a really bad metric and absolutely should not be used. It's one good point is that it's a single number and when it's high, it's 'good' and when it's low, that's 'bad', but it includes things that aren't measures of a healthy society and excludes many things that are - and it is insensitive to whether an economy is sustainable - so is entirely misleading and it's getting us into trouble. I'm not against wealth creation, and I believe in rewarding hard work, originality, creativity and excellence. My issue is with the use of GDP as a metric for success. I don't have the answer, I'm just staring at the problem.

Free trade helps consumers not necessarily workers if free trade hurts workers they won’t/can’t be consumers. In truth it’s not so much a question of either/or it’s a question of balance.

Very educational, again, keep it up, Thanks PD!

Great video; very informative! Will you make new videos in mathematics (e.g., calculus)?

Free traders miss the point that competitive advantages are often made on the expense of harming people (e.g. through lower labour standards) or exploit shared ressources as the climate or other environmental ressources. Thus, it is reasonable to create markets that disadvantage products with higher exploitation quotas and pay higher prices for products as there come less externalised costs with them.

Yes, we Brits are the only nation in the world to impose economic sanctions on itself

India has 100% tariffs on imported cars, & still companies like Harley Davidson & Ford had to give up producing in India.

I'm not an expert but after analyzing this video and all its contents, I cannot say anything because as I said in the beginning "I'm not an expert".

There is a basic argument that is not discussed and that is fundamentally that free markets don't exist. The WTO is a fundamentally flawed organization that perpetuated the disparities of GATT. There is also the overlooked wording in the phrases used including the term "generally" . I find that when you use Economics 101 to write a script, you reduce the value of a discussion. PS I am a great supporter of the channel in general but this kind of "Free Trade" argument creates a utopian idea that exists only in a theory. Love your work in general though, keep doing it.

I took macro then micro economics in university n think this video is excellent fir a quick lil bit to drop some info fir ppl who did not have the time or energy or money to reas a book

Pros of proteccionism: you can develop your own industry, developing your own country. Cons of proteccionism: your country gets coup de'etated until their government is not proteccionist anymore

Thanks I really needed to understand this

Thx professor, keep your work ❤️

Wonderful video.

I dispute that free trade increases your standard of living. Quality may go up. prices will go down. but you will earn less money too!!! remember earlier in the video where protectionism made sure domestic workers kept their jobs? yea, without that, your employer went bankrupt, you got fired and forced to accept a lower-paying job. but hey, stuff costs a little less now... your standard of living going up is predicated on the assumption your wage stays the same which it won't, it's likely to go down. I am not arguing for protectionism, I'm just pointing out that the situation is far more complex than the video lets on.

Can we say free or fair trade among partners.if yes why

Brexit was not really a backlash against free trade. For those who voted for it, it seems more to have been about the EU regulations and free movement of people.

Hiiiii I am using this channel to prepare for algebra 1 and watching your old flat earth videos I love how you explain things well across so many topics you clearly do research Also i have never been so early to any video ever, not even just your channel. Just ever. I know it’s kinda cringey to be like, “i’m early” but i’m happy about it (excuse my bad typing idk why but i just can’t bring myself to type well today)

Doesn't protectionism also keeps money in the local economy? If you're buying from a company that doesn't isn't locally owned any profit is just sent out to shareholders. This seems especially true on the small scale and may explain why so many small towns dry up.

Professor you're the best❤

Really appreciate this economics series🎉❤

i just love how its protectionism when someone has a connection and free trade for everyone else

Look at the Smoot Hawley Tariff Act to see when protectionism can be harmful

The problem I have with free trade is one you already mentioned, the example with the shirts. The big problem I see with all of this is the fact that there isn't a set currency of the world. Each country has their own currency with their own worth in comparison to other currencies. Now someone living in a country where 1 of their type of currency is worth lets say 0.001$ earns ~1000 of that currency in a month, which would equal 1$ in the US. In their country, this money would be enough for a low average living standard, yet in the US 1$ isn't enough. Now this worker produces ~250 Shirts a month lets say just for good measure, which means 250 Shirts are worth ~1000 foreign currency in labor plus some 500 foreign currency in material cost. Perhaps I am simplifying to much here, but now calculate the value of one shirt: 1 Shirt is worth 6 foreign currency, meaning 0.006$. Now we want to sell this in the US. Let's say you sell one of these Shirts for 5$ in the US from which you gain 2$ profit, than one shirt already generates 333.33...x the amount its worth, which is a huge profit margin (If that even is a profit margin I am talking from my current understanding of all of this which is not much). No firm in the USA could produce such margins without astronomical prices or worker abuse, so the most efficient and profitable way for a US Shirt maker is to produce in said country where the work is cheap, thus weakening the domestic shirt production. If all US Shirt makers think that way, which they might considering they would make a huge amount of money in the process, the domestic shirt production would cease to exist. In my opinion, this scenario wouldn't happen in a world with one currency, as outsourcing would be more expensive than domestic production, thus enabling free trade and at the same time having the benefits of protectionism. However there may be an argument to be made here, that a "World Coin" would impact free trade in the way protectionism does at the moment... I just noticed this while writing: Wouldn't a "World Coin" per se lead to some sort of global protectionism?

What a good video

At 2:30 you forgot to mention that if there is no trade barrier, its cheaper for the consumer

I am here from nepal for economics exam preparation

I recommend reading The Divide by Jason Hickel, more specifically the chapter 6 on "Free Trade"

I want longer videos

Peak educational content

Free trade is not so free when there is always the threat of sanctions.

Finding that balance, is the key😊

I can't wait for the end of free trade, and of mass oceanic commerce.

Sorry the photograph is mistaken you should’ve drawn the earth as it is. (flat)

I am surprised that there are people thinking that this is propaganda when the video does not even give you a direct message of which is better, it is true that it leans towards the free market but it is simply because it is the most efficient way to market, for a reason the countries completely secluded can be counted on the palm of the fingers, while the vast majority decides to open up to the free market on their own, it is a fact that a more liberal economic model is more efficient, only ridiculously large countries could close their market without losing of some essential products You can't say that everything that is against your opinion is propaganda when your opinion is literally: "2+2=5"

It is very simple, if your competitors do not operate in the same environmental, political, social environment that you do, it is not free trade

Love from India 🇮🇳

Outsourcing of jobs by domestic companies is NOT free trade, yet that's what we get, resulting in declining or stagnant wages.

As a Minarchist. I ask my Libertarian friend how can a free trade country survive if they are surrounded by countries that does protectionism? Anyone can help him answer this?

Okay, like the video for definitional preposes.

Me and the Homies love free trade.

free trade does not lead to higher quality products, and the “efficiency” it incentivizes usually means less pay and worse working conditions for people in countries without regulations

You lost your job at the shirt factory, but strawberries are 20 cents cheaper!

how can i give this more than one like?

Is free trade good? It depends on how much the price is going down. If prices go down a dollar or 2, we are better off making it in the US, one of the most natural resource rich countries in the world

5:30 - Saying that the UK's own citizens voted to leave the EU is a very strong statement compared to what actually happened. It won by a slim majority after a widespread and well-funded campaign (consisting primarily of lies), when it should have required a much larger majority for such a drastic move.

You forgot to mention that the only reason free trade works is because of the US Navy protecting trade lanes. If the USA loses interest on protecting trade lanes, then free trade can fall apart quite quickly.

thanks for the information! / better understanding

There is also a 3rd option, which I would call anti-protectionism. It is not regular free trade, as you have quotas and other limitations on domestic companies, pumping their prices, and tax reliefs or exemptions for foreign companies. We've got this 'unique' model invented in Poland, works so well that millions of people left the country since 2005. By the way, protecting infant industries seems to not work that well after all - it did not work in Brazil between 1971-1990, the outcomes were mostly opposite than anticipated.

he mentioned "war" three times

I believe a some very very very little protectionism is necessary and saying in% would be 95% free trade 5% protectionism. Food ,water ,air , fuel and weapons. And protectionism should be just looked similar to government necessary evil have to kept small at all time. I don't like protectionism but People like are in very minority thats why I know we have to compromise. Because these majority people see through bs of socialism and protectionism and other bs of politicians only when nation is hit rock bottom and bounce back is very hard and sometimes impossible.

Not true, you do not get cheaper goods from globalization. You do hypothetically because a low wage worker in another company can produce it cheaper, but that competition reduces your wages, and the product would be cheaper but the government will react to that by devaluing the currency tk hit the 2-3% inflation target. If you are a working class person, you really only lose from globalization. To go a step further, the wealthy business owners from other countries will then come live in your country which raises asset prices like stocks and property which hurts the working class. The only part where globalization is good is because your country's rich, become richer than other countries and that gives an advantage in strategic industries

I have no problem with free trade and agree with what you have said. However, free trade only really works well if everyone is playing by the same rules. So, if the US has a minimum wage of say $7/hr and a foreign company does not have such a regulation, it is a reverse protectionism that allows the foreign worker to earn less to get us cheaper goods. A "fair trade" would be to look at key metrics (cost of doing business in one's country) and compare that to the exporting country and ensure that one's own country is not penalized for being force to adhere to higher standards. People/countries should compete on efficiency/productivity/quality not on who can, effectively, have slave labor producing the cheapest products.

I voted to stay 😔

The massive problem you left out of "free trade" is how it allows for foreign actors to control our government. Because we allow legal bribery (lobbying), it sees nations like China or Saudi Arabia, to spend massive amounts on our government to ignore human rights violations in order to secure better trade deals.

This comment section is gonna give you a whole lot to chew on Dave, don't have too much fun!

I think you might need to research and understand Brexit better, because the UK voted to leave because of the EU trade law being anti free trade. Since leaving the UK has secured not only new trade deals, but also new security deals both increasing trade and GDP. Not to mention the UK is now going to become a member of the CPTPP which has the fastest growing economies on earth in it. To put this into perspective; the EUs share of global GDP has more than halfed since 1980, and is set to continue this rate towards 2050. Meanwhile, the CPTPP is set to have the majority of the worlds middle class in it by 2050. Since France largely blocks any new trade deals for the EU which may upset their population, the EU is stagnant. Sorry to say but your understanding is flawed and mixed up. The UK supports free trade, after all we did invent the modern concept of it.

It’s June now, where is the immunology

As a grad in political economy, an MA grad in IR, and an MA grad in Strategic Studies, I'm not flexing, but I have skin in this debate. I feel you are missing a big geopolitical dimension here by invoking Ricardo style liberalism on free trade. This is not unusual, economists always side step politics. But a free trade world requires a broad consensus and the world is becoming increasingly fractious. FTAs aren't free trade agreements at all anyway (a misnomer for privileged access agreements) , and our liberalism on trade has rendered us profoundly susceptible to supply chain snarls due to JIT delivery or international tension. This is also why Bidenomics is subsidising US chip manufacturing and AI dev lest China steal the march. Some techs are too critical to willingly cede their manufacture to potential rivals. Also, free trade doesn't always promote peace and international bonhomie. An earlier period of flourishing global trade preceded WWI. Not to mention, Marxist-Leninists argue free trade erodes hard-won workers' rights by outsourcing cheap labour. I'm no Leninist, but I do think he had a point on this.

Free trade when you don't need to hold a US dollars to trade and can trade with out your economy being lade Sedge too with arbitrary sanctions .

Imagine making your tax slaves pay extra for goods your country cannot compete with

Protectionism is bad that is why developed countries practice it towards the poor countries. 😢😅😂

Fantastic video, but still not as fun as debunking flat earther :)

All those people who say "buy local" most likely buy the stuff from the same place that you buy them. "Buy local" simply means "Support us middlemen"

Weak

Viva Milei y la libertad carajooo

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