‘temporary’ protection from low- cost foreign producers until they are able to compete equal footing. So tariffs are put up, making the once-cheap foreign goods to be artificially expensive. Local producers can now raise the price of production and enable them to enjoy some profits.
2. Increase in Revenue
In many developing countries, it is quite difficult to earn sufficient revenue from income tax and corporation tax. 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. Others include banking services and chemicals.
4. Narrowing Balance of Deficit
One of the arguments for protectionist measures is also to fix the deficit in balance of payments particularly current account. It is hoped that with more expensive foreign goods, its demand will fall in relation to exports. As such over the time current account deficit will be narrowed.
5. Retaliation
As a means of retaliation, in the world, protectionism tends to be infectious. 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.
