By Victoria Loreto Moreno, Dariela Sanabria Dugarte Y Elvira Fernández Chacín – Students of the School of International Relations
The discussion about free trade and protectionism has existed for centuries. On one hand, there are those who say that releasing trade barriers will improve the quality of life of all countries, on the other, who claim that protectionist policies are essential to moving towards economic development. Nowadays, this debate is particularly relevant to the region. On the one hand, negotiations on regional agreements are being carried out under an absolutely free-trade logic. On the other hand, since the international financial crisis of 2008, the world has taken a more protectionist stance while the region is taking an open path. Recent world economic history has shown that countries that have adopted one of the two options, or a combination of both in different periods, have had dissimilar results in their commercial behavior, and consequently in the development of productive sectors.
In order to understand the pros and cons of each policy, it’s important to have knowledge of its definitions. Protectionism is an economic policy that restricts imports from other countries by applying tariff barriers to these products in order to encourage national production. For some, protectionism is more burdensome and unfair, precisely, for people who can least stand it. Tariffs that raise the price of fabrics or beer affect the poor more than the rich, they also reduce trade and negatively affect consumers in general and they harm producers and workers in export sectors, both in the country that applies protectionist policies and in protected countries. The advantages of protectionism are distinguishable because it allows maintaining or promoting the employment of the protected sectors and, in addition, easily excites nationalist feelings, so it will have great predicament among those who directly benefit from that protection and among those who do not agree to See beyond the short term.
On the other hand, free trade is an economic concept, referring to the sale of products between countries, free of tariffs and any form of trade barriers. Free trade involves the elimination of artificial barriers to trade between individuals and companies from different countries. All nations can take advantage of free trade, using it as a way to improve their productive efficiency. All nations are capable of producing some goods or service, however, the lack of resources or knowledge can make the production of a good or service inefficient or ineffective. With greater free trade, national companies face more competition from abroad. This is why there will be more incentives to increase efficiency and reduce production costs. With this, national monopolies that can raise prices too high are largely avoided.
However, which one benefits our country the most? Costa Rica has been building a solid foreign trade platform, which has served as a competitive tool for the country. The fact that Costa Rican products are assured of being able to enter other countries without paying import taxes stimulates the creation of more exporting companies and the expansion of existing ones and, with it, more sources of work, as well as the increase of the GDP, that would lead to an increase in economic activity, if economic activity picks up, it means that unemployment tends to decrease and that per capita income increases. This, in turn, results in economic growth, as economic agents will be more inclined to spend instead of saving.