Describe the three arguments of protectionism ( cheap foreign labor, increased aggregate demand, and infant industry)...

Describe the three arguments of protectionism ( cheap foreign labor, increased aggregate demand, and infant industry) and critically evaluate the arguments in favor of restriction.

Expert Solution

Answer : Protectionism means government restrictions on trade such as for benefit of the domestic industry. The three main reasons for Protectionism are :

Cheap forgien labour : When there is Protectionism in a country than this lead to problem in avialiability of the cheap labour for an industry. When labour is costly than there is higher production cost which resulted in increase in the price of the product.But when Protectionism has been removed than there is an easy availability of labour at cheaper rate.
Increased aggregate demand : when protectionism has been removed and there is a global market available for the firm which resulted increase in the aggregate demand for the product has been increased and consumption level of the consumer also increases.
Infant industry: Protectionism has been helped in the protection of the infant industry from globle trade. Trading nation should temporarily shield their newly developing industry from forgien competition.

Arguments in favour of restrictions are :

Restrictions on trade helps the domestic business to compete an flourished in the economy.
Restrictions help the consumers as well as citizenof the economy to protect their jobs.
Domestic producers an infant Industries benefited from a lot.
Restrictions help in maintaining higher job in the workplace.
Less depletion of environmental resources.

Rahul Sunny answered 2 years ago

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