Commentary

What is Protectionism?

• Protectionism refers to intervention in the form of government policies that restrict and regulate international trade in order to help domestic industries.
• This can appear in the form of tariffs, import quotas, product standards, subsidies, or complete embargoes.

Why is it implemented?

• With the aim of improving economic activity within a domestic setting
• For quality and safety concerns over imported items

Potential benefits

• Protects against the negative impacts of free trade
• Protects certain industries and safeguards jobs. One example of this is Trump imposing a tariff on steel imports to protect jobs in the US steel industry.
• Further, the 'Infant Industry Argument' states that developing countries are justified to put tariffs on imports if they are seeking to develop new industries and diversify their economy.
• Raises government revenue
• Protects against international competition
• Environmental standards and regulations can be imposed on products, as well as benefiting the environment by reducing carbon emissions through discouraging imports

Opposition

Critics argue many of the potential benefits can be directly counteracted by the negatives:

• Retaliation over protectionism can cause higher import/consumer prices
• Lack of competition also can also lead to higher prices by domestic industries and lower quality
• Higher prices may lead to lower overall demand, thus causing job losses
• Those in favour of free trade generally oppose any market intervention