Question

What is trade protection and arguments in factors of protection?

Answer 1

Trade protection is the deliberate attempt to limit imports or promote exports by putting up barriers to trade. Despite the arguments in favour of free trade and increasing trade openness, protectionism is still widely practiced.The motives for protection

The main arguments for protection are:

Protect sunrise industries

Barriers to trade can be used to protectsunrise industries, also known as infant industries, such as those involving new technologies. This gives new firms the chance to develop, grow, and become globally competitive.

Protection of domestic industries may allow they to develop a comparative advantage. For example, domestic firms may expand when protected from competition and benefit from economies of scale. As firms grow they may invest in real and human capital and develop new capabilities and skills. Once these skills and capabilities are developed there is less need for trade protection, and barriers may be eventually removed.

Protect sunset industries

At the other end of scale are sunset industries, also known as declining industries, which might need some support to enable them to decline slowly, and avoid some of the negative effects of such decline. For the UK, each generation throws up its own declining industries, such as ship building in the 1950s, car production in the 1970s, and steel production in the 1990s.

Answer 2

Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas and a variety of other government regulations designed to allow (according to proponents) “fair competition” between imports and goods and services produced domestically.