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Chapter 1: Problem 2

What are some of the major arguments for and against an open trading system?

Short Answer

Expert verified
The major arguments for an open trading system include economic growth, variety of goods, and stimulating competition and innovation. The arguments against it include protection of nascent and domestic industries, income inequality, exploitation of workers in developing nations, and environmental concerns.

Step by step solution

01

Identifying arguments for open trading systems

An open trade system refers to a trade system where various nations can freely engage in commerce without restrictions or barriers such as tariffs, quotas, or bans. Some major arguments for an open trading system are: Economic Growth, as it encourages a larger market for goods and services from different parts of the world, leading to increased production and consumption. This results in economic growth and development. Variety of goods, it allows for a wide variety of goods and services from different parts of the world, which would otherwise not be available. Competition and Innovation, it encourages competition, which leads to innovation in order to remain competitive in the global market.
02

Identifying arguments against open trading systems

Conversely, here are some main arguments against an open trading system: Protection of nascent and domestic industries, critics believe that open trading can harm nascent industries that are not yet competitive enough to withstand international competition, thus hurting domestic industries. Income inequality, critics also argue that open trade can lead to increased income inequality within nations as corporations may move operations to nations with cheaper labour. Exploitation, they argue it can lead to the exploitation of workers in developing nations, and Environmental concerns, it can possibly lead to environmental degradation due to increased production and consumption.

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