The Case for Protection
A country engages in trade protection whenever it uses policies that
restrict the flow of trade in a way that favours domestic firms over their
foreign competitors. There are several valid arguments for protection,
including
promoting diversification
protecting specific groups
improving the terms of trade
protecting infant industries
earning economic profits in foreign marketsWe will discuss each of these arguments briefly. Note that the first two
arguments generally involve achieving some worthy objective at the cost
of a reduction in national income. The last three arguments are reasons for
protection as a means of increasing a country’s national income.