If a government decides that it will provide protection for a domestic industry, should the industry...

If a government decides that it will provide protection for a domestic industry, should the industry in question petition for protection in the form of quotas, tariffs, or subsidies? Do you think the type of protection the industry wants would differ from the type of protection the government would prefer?

Expert Solution

If the government decides to provide protection for a domestic industry, the industry should seek to maximize the protection in order to create as level a playing field as possible(Skewing it in their own favour will hurt them in the long run). If their foreign competitors have state subsidies, the industry should either get the government to tax their foreign competitors or provide them subsidies in order to make themselves competitive.Quotas can also be used if the industry is being priced out simply because their competitior is efficient in order to give them a portion of market share as safety blanket while they continue to griw and develop in order to match their foreign competitors.

The type of protection the industry need can be different from the type of protection the government will be willing to provide since it is possible that the government is not allowed to provide any of these measures due to pre existing trade agreements that may restrict those. Even if these agreements dont exist, the government needs to consder foreign actors and their potential response while framing a policy.

Rahul Sunny answered 2 years ago

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