Is international trade protectionism the solution to rebalance a persistent and growing country's balance of trade deficit? An empirical case study of UK balance of trade deficit

This dissertation examines the veracity of the economic argument which holds that through the employment of international trade protectionist policies, a country's balance of trade deficit can improve. Upon reviewing the relevant literature and establishing the theoretical framework, UK's balance of trade deficit has been used for empirical scrutiny, where the current account theories of elasticity approach and intertemporal model have been identified as key to conduct the present research; therefore, factors such as currency exchange devaluation and the relationship between national savings and country's investment have been gauged. The research has found that social-political forces play a paramount role in making trade policies and the several arguments of protection do not hold much economic support, since historical cases have demonstrated that the costs of protection outweigh the benefits in most cases. However, even then the research highlights that the preconceived public concept of a deficit in the balance of trade as harmful, might not be entirely true. that through the employment of international trade protectionist policies, a country's balance of trade deficit can improve. Upon reviewing the relevant literature and establishing the theoretical framework, UK's balance of trade deficit has been used for empirical scrutiny, where the current account theories of elasticity approach and intertemporal model have been identified as key to conduct the present research; therefore, factors such as currency exchange devaluation and the relationship between national savings and country's investment have been gauged. The research has found that socialpolitical forces play a paramount role in making trade policies and the several arguments of protection do not hold much economic support, since historical cases have demonstrated that the costs of protection outweigh the benefits in most cases. However, even then the research highlights that the preconceived public concept of a deficit in the balance of trade as harmful, might not be entirely true