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Economic reasons for protectionism

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Introduction

Economic reasons for protectionism Protectionism refers to the deliberate restriction of the movement of goods and services between countries. A government engages to protectionism when it introduces measures to protect its own industries from competition from the industries of other industries. There exist both economic and non economic reasons why protectionism are used:- Economic reasons 1. Protecting the infant industry This is the most traditional excuse and is often used by developing countries. They claim that they have many sunrise industries with great potential to be transferred into international business. However, at the mean time they yet to realize the cost advantage from economics of scale. ...read more.

Middle

This is because, the level of unemployment is usually high and there are very few large firms around. Therefore the government imposes tariffs and taxes onto foreign goods in order to raise the desired revenue. So, it is a source of revenue for the government and can be a major reason of flow of money in the country. 3. National Security for strategic industries Some arguments admit that although they may not have comparative advantage in the production of a good, protectionist measures must be maintained to ensure their survival. This means that for important industries like agriculture, a country may decide to limit imports in order to protect the strategic industry. ...read more.

Conclusion

Therefore one country responds to protectionism imposed by others. 6. Protecting jobs At any given time in an economy, there will also be some industries which are declining (sunset industries). To protect jobs, otherwise domestic industry will close down.We need to create jobs at home, and one way is to limit imports otherwise domestic industry will collapse. 7. Protecting a precise industry To protect a precise industry, for example industries like national airlines is considered to be a prestige industry that the country should protect .Government feels that such industries should exist in a country. 8. Protecting from dumping Dumping is an act of selling large quantities of a good in another country at aprice below its production. If dumping is not stopped, the importing country will face serous problems because it cannot compete with the cheap imported goods. ...read more.

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