Question

it is often argued that if foreign goods are kept out of the domestic economy:

Answer 1

it is often argued that if foreign goods are kept out of the domestic economy:

The process of keeping foreign goods out of domestic economy is known as Protectionist Policy.
This policy can be undertaken in the form of tariffs or import quotas to restrict the imports of foreign goods.
It is done so to protect the businesses, firms and institutes producing similar good to that of goods imported from other countries from international competition. It helps in the growth of small businesses in the country and allows the country to increase its trade balances.

However, it is often argued that if foreign good are kept out of the economy-

• there will be no gains from trade as the country won't be able to recognize its comparative advantage in producing a specific good
• it will also result in a deadweight loss and thus the welfare of the economy will fall.
• the limited choices of products will increase the prices of the goods and thus affect the poorer section of the economy
• the standards of living will fall as the poor have to consume the relatively expensive goods produced at home country
• it will hurt the developing countries who have more labour power to provide and thus, can produce goods at a cheaper rate
• there will also be a lack of economic efficiency which in turn will lead to lower economic growth