Question

What are the arguments for and against trade protection? Which of them, if any, do you find most persuasive and why? As a part of your answer fully evaluate strategic trade policy.

Answer 1

Infant industry argument is the most persuasive argument for trade restrictions for many nations.

1)The Infant-Industry Argument

In some industries, significant learningcurves exist such that production efficiency increases rapidly as a company stays in business longer and gets better at what it is doing. Further, the same produced can be produced in international market at a lower price. Thus, in these situations the industry in questions lobbies for trade protection based on infant industry argument.

2) National Security argument is the least persuasive, as per this argument, certain industries should be protected to reduce the dependency on the potentially hostile countries. However, this restriction is used or applied much more broadly than it should be in order to preserve the interests of producers and special interests at the expense of consumers.

3) The other arguments that can be persuasive are to protect the employment of the locals. This is an argument put forward during the recent recessions. However, by restricting trade for the purpose of employment generation inefficiencies