As economic growth is a foremost priority of almost every nation, especially some developing ones, the argument of whether these countries should increase their tariffs to strengthen local industries has emerged as a topic of interest. While this thinking is valid to a certain extent, I mostly disagree with it concerning the challenge of limiting foreign investment on nations’ long-term economic development.
On the one hand, there is a compelling reason why developing nations should implement high tariff barriers to protect their domestic markets. Many countries and foreign companies are using pricing strategy in some other markets to expand their presence, in order to enhance revenues and profits. Particularly, they aim at some developing markets by selling a huge amount of a certain commodity with a very reasonable price, sometimes even lower than the historical cost at their home countries, to gain the advantage over some domestic producers. In the long-term period, this act of dumping will drive away some local sellers, and the entire market will be taken by international producers. This may sound great for domestic consumers at first because every shopping option is all budget-friendly, but over time, the country will lose its self-sufficient ability, production will decrease leading to many serious problems namely unemployment, lowering GDP, and over-reliance on the global supply chain. Therefore, the governments of developing countries are suggested to implement high tariffs to ensure that the local industries are safe and well-developed.
On the other hand, despite the aforementioned benefit of high tariffs on encouraging growth of domestic suppliers, I largely disagree that authorities should implement only and prioritize this policy over others. The rationale for my disapproval is that imposing high tariffs can prevent foreign direct investment inflow, and international trade of a nation as foreign companies have to pay a huge amount of money for opportunities to do business in developing nations. This leads to the increase of self-sufficiency, the decrease of the export volume to other nations, and discouraging strategic partnerships with international friends. Although protecting the domestic market is the foremost priority for a nation’s growth, if a nation becomes a less competitive and attractive destination for foreign investors, it will lose its international position, gradually be left behind, and not able to keep pace with the growth rate of other nations. As a result, this developing nation will hardly have a chance to become a thriving, and developed one.
In conclusion, while the potential benefit of increasing tariffs on exported goods to protect domestic industries make it seem like a good idea, I believe that instead of focusing on this method only, it is better for the authorities to implement some policies, for example reducing taxes to support internal manufacturers and distributors, rising the production standards to enhance the quality of domestic goods making them appealing shopping options, requiring foreign companies to collaborate in some certain extents with local ones as a condition to do business in their countries, and dealing with overseas partnerships creating chances for local suppliers going beyond the domestic markets, to balance between protecting local industries and fostering international trade.