IB economics commentary (Section 5 - Development Economics) Essay

IB economics commentary (Section 5 - Development Economics) - Essay physical exertionProtectionism is the practice of protecting domestic goods and service industries from foreign competition with tariff and non-tariff barriers (Answers). This economic commentary discusses the article Buy American feud exposes European threefold standards.During tough economic times it seems that countries become more conscious of the needs of its local industries. The European Union recently brought back its subsidies program to protect the dry lands dairy industry. A subsidy is a form of financial concern given to a business or industry by the presidency (Varian). It is considered the opposite of a tax. In Europe other more subtle measures be occurring that are not good for free trade. Some European nations much(prenominal) as Greece are forcing developing nations which are beneficiaries of their aid programs to purchase goods and services from them (Polack). Despite the help Greece is provi ding the agreements hurt the economic growth of developing nations by restricting their options and increasing their costs of doing business. The Greek contracts being tied to financial aid increases the costs of goods and services by 20%. This implies that actually value of the financial aid is deflated due to the loss of purchasing power as a consequence of inflated contract prices. Two of the factors that are causing the prices of these contracts to go are consultant fees and expensive materials. According to ActionAid the average costs of consultants working in developing nations is $1000 per day (Polack).Bilateral agreements are a common international occurrence that can have both positive and negative impacts on the nations involved in the treaties. A bilateral trade agreement is pact in which two countries in which the countries agree to lift most tariffs, quotas, and other trade barriers. The good thing about these agreements is that it promotes free trades which increases business activity between the nations.