AGUSTIN, JEMIMAH RUTH N.

ECONOMIC GLOBALIZATION
Protectionist Economic Policies

Advantages Disadvantages
1. Difficulty in Bringing
1. Protection from Unjust Foreign Competition on Products and
Services 1. Difficulty in Bringing Foreign Investors

Protectionism is an economic theory that minimizes or eliminates
free trade between the countries by imposing trade barriers such
as tariffs and quotas on imported goods and services, as well as
other government regulations, whether in terms of products or
services, to keep the domestic economy rolling and free from
external or foreign intervention. Because of the decrease in
imports, small and medium-sized enterprises (SMEs) or infant
industries can thrive locally when supported and promoted
without the threat of foreign large corporations.
Unlike in other nations that do not have
restrictions on foreign investment thus making
those countries viable and attractive destinations
for foreign direct investment, protectionism will
cause great difficulty in bringing in foreign
investors who often are capable of creating lots of
jobs and are often able to provide high-quality
skills training and provide Filipinos with exposure
to higher standards of operation and business
systems.

2.Creation of New Jobs for Local Workers

Protectionist economic policies help create new jobs for local workers.
Domestic industries can hire domestically because they are protected by
tariffs and quotas, and they are aided by government subsidies. 2. Businesses Suffer from Protectionism in the
The local economy will also benefit since unemployment will be lower as a Long Run
result of local enterprises, and they will be able to create and sell more
Government support often builds corporate
products with less difficulty, providing firms less motive to cut costs by
contentment, which could lead to a business to
reducing their staff. Those who have jobs will continue to consume,
believe that it has a pleasant safety net set up
allowing the economy to remain operational.
behind it in the event of strong foreign
Trade protectionism brings back jobs into a state as it makes the process of competition as these businesses might not have
establishing a company offshore more complex, thus discouraging setting the resources necessary to survive on their own.
up businesses overseas. This results in businesses being established locally Although protectionism is beneficial for
and the recruitment of the state’s citizens, maintaining the wealth of the businesses in the short term, their dependency
country. Protectionism permits the new and upcoming firms to work and in the government is deemed futile in the long
develop at an acceptable rate, because they will not be pressured by run.
foreign, more experienced firms. The new firms can grow until they
themselves are big enough to compete in international markets,
encouraging positive features for the domestic economy in the future.
 Liberalist Economic Policies

Advantages Disadvantages

1. Unfair Business Activities and Exploitation of

Resources
1. Improved Innovation and Efficiency
If businesses are left alone without any regulations or
With open-markets, technological innovation and
restrictions, they may not automatically formulate
resources flow freely due to the exchange of creative
themselves into the best and fair formation. Fewer
ideas, allowing development to take place more
regulations on business economic practices also results
efficiently in all involved countries.
in the exploitation of natural resources.

2. Market Inconsistency
2. Creation of Jobs Domestically and Overseas
The government cannot easily control market growth,
The broadening of the sectors of involved countries
there are cases where the market is unstable and
allows for the exchange of labourers, granting people
experiencing a recession or affected by human
the opportunity to work both abroad and locally as
behaviours, making it difficult to predict the
more jobs are created
competitive market system.
 EXAMPLES

A. In poor or emerging countries, strict

Advantages protectionist policies like high tariffs and
embargoes on imports can help their new
industries grow by protecting them from foreign
competition. In 1958, President Carlos P. Garcia
implemented a highly controversial law: The
“Filipino First” policy.

The Filipino First policy was the government’s

active promotion and preference for Filipino-
owned businesses over foreign-owned ones. It
also controlled imports and currency to favor
Filipino entrepreneurs. During the first years of
implementing the policy, Filipinos’ economic
output surged in manufacturing, agriculture, and
mining. Accordingly, new jobs were created for
Protectionist local workers.

Economic Policies

B. The current 1987 Constitution many

restrictions on economic activities, setting up
protectionist provisions that limit businesses in
the Philippines to a minimum of at least 60%
ownership by local Filipinos, and a maximum of
40% by foreign investors. For advertising
companies, it limits ownership to a minimum of
70% by local Filipinos and at most 30% by
foreigners. Media companies must be owned
100% by local Filipinos.
Disadvantages
Job creation is thus much faster and on a larger
scale in countries that allow easy-entry of Foreign
Direct Investment. Since there are not that many
local Filipino entrepreneurs creating many jobs
coupled with the dearth of foreign investments
due to the protectionist economic provisions in
the Constitution, unemployment is extremely high
in the Philippines, forcing Filipinos to leave their
families, loved ones, and children behind while
seeking basic employment in other countries.
 A. For example, the Philippines has benefited
from a substantial increase in trade and
Advantages investments with the economic integration of the
Association of Southeast Asian Nations (ASEAN)
which created a wide choice of goods for
consumers thus supporting local businesses to
expand overseas. Increasing foreign investments
is one of the goals of the ASEAN to be a power
house in the world economy. As a consequence,
there is a necessity of removing limitations and
applying proven international business operations
to the whole region, creating job opportunities
both domestically and overseas. Nationals can
work abroad increasing productivity thus more
job opportunities for the Overseas Filipino
Workers (OFWs).

Liberalist B. Flooding the market with imported goods

Economic Policies destroys local industries and livelihoods, resulting
in increased poverty and unemployment. The
reduced rate of protection for manufacturing has
resulted in bankruptcies of local industries as
locally produced goods suffer from unfair
competition by cheap imports.

In January 2006, the number of Filipinos unable

to find work increased by 15% from previous
year, bringing the number to 2.8 million from 2.5
million in 2005 (IBON, 2006b). Philippine
agriculture also suffered from the implementation
of the WTO’s Agreement of Agriculture (AoA).
Although world trade increased by 25%,
Philippine products’ access to the world market
was restricted, resulting in accumulated trade
deficits of $5.2 billion since 1995. Since the WTO
Disadvantages regime, the agricultural share of the Philippine
GDP (gross domestic product) has been declining:
down to 18% in 2002 from 28% in the pre-WTO
regime. This decline in agricultural productivity
coupled by unrestricted imports has contributed
to the decline in agricultural jobs (since 1994
when the Philippine government signed the WTO),
devastating farmers’ livelihood. In 2000 alone,
approximately two million jobs were lost (Del
Rosario-Malonzo, 2004a).
REFERENCES:

Mounib,H.(2019. Trade Liberalization vs. Protectionism: Pros & Cons. Retrieved from
https://americanfreedominstitute.com/2019/05/23/trade-liberalization-vs-protectionism/

Longley, R.(2018).Understanding the Pros and Cons of Protectionism. Retrieved from

https://www.thoughtco.com/protectionism-definition-and-examples-4571027

Bello, W. (2004) The Anti-Development State: The Political Economy of Permanent Crisis in the
Philippines. Diliman, Quezon City: University of the Philippines and Bangkok, Thailand: Focus on the
Global South.

Tacujan, P. (2013) Protectionist clauses in the Philippine Constitution restrict the flow of foreign direct
investment. Philstar. Com retrieved from
https://www.philstar.com/business/2013/06/03/949375/protectionist-clauses-philippine-constitution-
restrict-flow-foreign-direct-investment