INB302

Assignment
Protectionism & Free trade
Name:Taeb Khan
ID:2010730
Sec:1

Protectionism
Introduction
Protectionism stands as a governmental strategy utilized by countries to shield their local industries
and markets from foreign competition. This approach involves implementing measures like tariffs,
quotas, subsidies, and non-tariff barriers. While the primary aim may be to safeguard domestic jobs
and businesses, protectionism has garnered its share of critics who question its long-term advantages
and its potential to negatively impact global trade and collaboration. This report aims to deliver an
exhaustive examination of protectionism from the vantage point of international business, with a
specific focus on the context of Bangladesh.
The Theoretical Basis of Protectionism
The origins of protectionism can be traced to the mercantilist theory, which promotes the idea that
nations should amass trade surpluses and limit deficits to attain national prosperity. In contemporary
scenarios, the rationale behind protectionism can be broadly categorized as follows:
Economic Advancement and Diversification: Developing nations might impose trade barriers to
safeguard and nurture burgeoning industries until they achieve competitiveness on the global stage.
Job Preservation: Measures are taken to prevent unemployment triggered by the influx of cheaper
foreign products that might outperform domestic counterparts.
National Security: Certain industries are regarded as crucial for a nation's defense and security.
Political Motivations: Governments may adopt protectionist measures to appease specific interest
groups, labor unions, or business sectors.
From the standpoint of international business, protectionism presents both opportunities and
challenges:
Market Entry: High tariffs and non-tariff barriers can pose challenges for firms aiming to access new
markets.
Financial Implications: Tariffs can escalate export costs, rendering products pricier and possibly less
competitive.
Disruptions in Supply Chains: Protectionism can disrupt the smooth flow of global supply chains,
particularly when crucial components or raw materials face trade constraints.
Prospects in Local Production: In certain cases, international companies might contemplate
establishing local production units to bypass trade barriers, potentially leading to Foreign Direct
Investment (FDI) in the protectionist country.
Bangladesh and Its Approach to Protectionism
Bangladesh, a developing nation in South Asia, has undergone significant growth, notably in its
textile and apparel sectors. It's important to note that the country has also embraced protectionist
strategies, primarily to safeguard domestic industries, achieve economic diversification, and ensure
the welfare of its extensive labor force.
Tariffs and Subsidies: Bangladesh has deployed tariffs as a tool to shield local industries from
foreign competition. This is exemplified in sectors like agriculture, where domestic farmers receive
subsidies and benefit from tariffs imposed on imported agricultural goods to maintain
competitiveness within the domestic market.
Emphasis on Domestic Industries: The government has consistently expressed its intent to diversify
the economy beyond textiles. Through the implementation of protectionist measures, the aim is to
create a supportive environment for emerging industries to thrive and achieve competitiveness.
Initiatives have been launched to foster the growth of the nation's electronics and high-tech sectors.
Trade Agreements: While Bangladesh is an active participant in regional trade agreements like the
South Asian Association for Regional Cooperation (SAARC), it remains cautious about engaging in
global trade agreements that could potentially undermine its domestic interests.
Challenges and Criticisms: Bangladesh's protectionist stance has faced criticism, particularly from
business associations and international trade bodies. These critics argue that excessive protectionism
could hinder innovation, artificially inflate prices, and limit the nation's ability to fully integrate into
global value chains.
Conclusion
Protectionism, as a trade strategy, brings forth both advantages and drawbacks. While it can provide
immediate relief to local industries and safeguard jobs, its long-term consequences can be intricate,
potentially leading to inefficiencies and strained trade relationships. Bangladesh, akin to many
developing nations, has employed protectionism as a tool for economic expansion and
diversification. However, as global economic interconnections intensify, countries must strike a
balance between safeguarding domestic interests and fostering international collaboration and trade.
The trajectory of international business in the realm of protectionism will inevitably demand
enhanced adaptability from companies, involving localization of operations and adept navigation of
intricate trade landscapes. Governments will also need to meticulously assess the broader
implications of their trade policies, ensuring that these policies pave the way for sustainable
economic growth and prosperity.

Free Trade
Introduction
The concept of unrestricted trade, known as free trade, has always sparked extensive discussions in
the realm of international business. Originating from the economic theories of Adam Smith and
David Ricardo, free trade advocates for open markets, asserting that the global allocation of
resources is optimized, efficiency is maximized, and consumer well-being is enhanced. This report
aims to comprehensively explore the concept of free trade within the context of international
business, with a particular focus on how Bangladesh has embraced and utilized free trade principles.
International Business Perspective on Free Trade
The domain of international business, which encompasses commercial activities spanning multiple
countries, is significantly influenced by trade policies. From this standpoint, free trade offers both
advantages and challenges:
Economic Efficiency: At its core, free trade enables nations to concentrate on producing goods in
which they hold a comparative advantage. This leads to efficient resource allocation globally and
potentially results in the maximization of overall output.
Consumer Advantage: Reduced trade barriers typically lead to lower product costs and increased
product diversity. Consumers benefit from more affordable options and a wider range of choices.
Stimulation of Innovation: Open markets foster competition, compelling businesses to innovate in
order to maintain or expand their market share. This drive for innovation contributes to technological
advancements and product enhancements.
Foreign Direct Investment (FDI): Countries with open trade policies attract foreign investments.
Multinational corporations seek markets that facilitate the smooth movement of goods, services, and
capital.
However, the journey to free trade is not without challenges. Concerns often arise about potential job
displacement in specific industries, labor exploitation in developing nations, and potential
environmental degradation.
Bangladesh's Approach to Free Trade Law
Bangladesh, a developing nation, has strategically employed free trade laws to fuel its growth and
development objectives. Several facets of its engagement with free trade are noteworthy:
Trade Liberalization: Starting from the 1980s, Bangladesh has progressively liberalized its economy.
Import regulations have been relaxed, and tariffs significantly reduced. These steps have enhanced
the country's attractiveness to foreign businesses and facilitated increased trade.
Free Trade Agreements (FTAs): While not heavily involved in multilateral FTAs, Bangladesh
enjoys duty-free and quota-free access to major markets, such as the European Union, through
initiatives like "Everything But Arms." Additionally, the country is actively pursuing bilateral trade
agreements with key partners like Malaysia and Turkey.
Readymade Garment (RMG) Sector: Bangladesh's success in leveraging free trade is exemplified by
its RMG sector. This labor-intensive industry constitutes a substantial portion of the nation's exports
and has greatly benefited from global trade liberalization. Bangladesh's comparative advantage in
this sector has been effectively capitalized upon.
Trade Zones and Bodies: Bangladesh has established Export Processing Zones (EPZs) that offer
incentives for foreign investors, including duty-free raw material imports and unrestricted profit
repatriation. These zones demonstrate Bangladesh's commitment to utilizing free trade for its
developmental goals.
Active WTO Participation: As a member of the World Trade Organization (WTO), Bangladesh
actively represents the interests of Least Developed Countries (LDCs). The country seeks extensions
on the implementation of certain WTO agreements that could hinder its industrialization efforts,
illustrating a strategic approach to global trade norms.
Conclusion
Free trade, viewed from an international business perspective, presents both opportunities and
challenges. While it promises increased efficiency, consumer benefits, innovation, and FDI, it also
poses hurdles that nations must navigate. Bangladesh's pursuit of development exemplifies a
pragmatic approach to free trade. By leveraging its strengths, advocating for its interests on a global
stage, and creating a conducive business environment, the nation offers valuable insights into how
developing countries can strategically engage with the principles of free trade.
In the dynamic landscape of global commerce, it remains essential for countries, businesses, and
policymakers to continuously assess and adapt their positions on free trade, ensuring that its benefits
are maximized while its challenges are effectively addressed.