ib econ - 4.3: arguments for and against trade control/protection

credits https://www.econinja.net/global-economy/4-3-arguments-for-and-against-trade-controlprotection

why is protection of infant industries an argument for trade control/protection?

new industries in a country that have the potential to get a comparative advantage in the future may need protection now in order to survive

why is national security an argument for trade control/protection?

instead of completely specialising, it is important that countries still have some degree of self-sufficiently in each market, in case of wars or other conflicts. many countries forgot this when they were dependent on Russian gas prior to the invasion of Ukraine, and experienced energy crises because of a lack of self-sufficiency in energy.

why is health and safety an argument for trade protection?

some countries have stricter health and safety controls to protect its people, such as limits of pollution from cars or nicotine content in vapes. because of this, the government may disincentivise or ban dirtier or more dangerous products from abroad.

why are environmental standards an argument for trade protection?

some countries want to protect their environment more than others, and therefore try and limit the amount of imports of potentially harmful goods and services.

why is anti-dumping an argument for trade protection?

• dumping is the sale of goods or services by foreign firms at a lower price than the cost of production - the short term loss is done to drive out local competiton.

• governments usually don’t want this, so they enforce protection against foreign firms

why is balance of payments correction an argument for trade protection?

if a country spends more on imports than it earns from exports, this can be corrected by reducing imports

why is government revenue an argue for trade protection?

tariffs result in earning more tax revenue, which can be used in fiscal policy

why is protection of jobs an argument for trade protection?

when imports occur, domestic firms lose revenue, resulting in a loss of demand for jobs. protection can prevent this.

why is diversification for economically least developed countries (eldcs) an argument for trade protection?

eldcs are poor countries that are usually very specialised in just a few fragile industries, and depend on imports for everything else. if they disincentivise imports and focus on diversifying their own industries, they can improve their development status.

why is misallocation of resources an argument against trade protection?

as tariffs or quotas are put in place, social surplus decreases, and the market becomes allocatively inefficient, wasting some resources

why is retaliation an argument against trade protectionism?

as one country puts in place a trade protection, other countries may do the same in protest

why is higher prices an argument against trade protection?

trade barriers raise prices

why is increased costs an argument against trade protection?

as prices increase, the cost of living will also. since this will also impact costs for business, they may not afford employees, lowering employment

why is less choice an argument against trade protection?

with imports being disincentivised, there will be less of them present, which reduces the amount of options consumers have.

why does the fact that domestic firms lack the incentive to become more efficient an argument against protection?

when they have the advantage given to them by the government, why would they need to innovate?

why is reduced export competitiveness an argument against trade protectionism?

because of this lack of incentive to innovate and become more efficient, domestic firms goods and services will not be very competitive in other countries, reducing their exports