Trade Protectionism
Trade protectionism is the policy of restricting imports from other countries through measures such as tariffs, quotas, and non-tariff barriers, in order to protect domestic industries and jobs from foreign competition. It is the opposite of free trade.[1]
Definition
Protectionism refers to government actions that restrict international trade in order to shield domestic producers. Such measures raise the price of imports, reduce their quantity, and shift demand toward domestic products.[1]
Instruments
| Instrument | Description |
|---|---|
| Tariff | A tax on imported or exported goods. |
| Quota | A limit on the quantity of a good that may be imported. |
| Embargo | A complete ban on trade with a particular country or in a particular good. |
| Non-Tariff Barriers | Standards, licensing, and administrative measures that restrict trade. |
| Subsidy | Support for domestic producers, which indirectly disadvantages foreign competitors. |
Arguments for and against
Arguments for protectionism include protecting infant industries, safeguarding jobs, ensuring national security, and countering unfair trade practices. Arguments against include higher prices for consumers, reduced efficiency and innovation, the risk of retaliation, and the loss of gains from trade. Economic analysis generally finds that protectionism reduces overall welfare, though it may benefit specific groups.[1]