Briefly describe at least three of the arguments for protectionism mentioned in your textbook.

Question

What will be an ideal response?

Answer 1

Four arguments might be mentioned here. There is the disruptive effect of trade, in which towns dependent on a single industry might suddenly find, with the onset of international trade, that the single industry is not as efficient as foreign rivals. Second, there is the infant industry argument, which asserts that a small, immature industry must be accorded protection from foreign competition until the industry has matured enough to produce as efficiently as its foreign competitors. Third, there is the concern of unfair competition, often in the form of government subsidies to exporting industries. By lowering costs to the exporting firm, the government makes it more difficult for firms in other countries to compete (and also confers a benefit on foreign consumers). Fourth, there is the argument that if a war were to break out, a country might suddenly find itself having to rely on its own domestic industries, and therefore protecting these industries is essential. The nation might find that it could not quickly and easily resurrect these industries from scratch during a war.