Question

Free Trade vs. Protectionism

The debate of Free trade vs. Protectionism usually includes a discussion of pros and cons of these 2 approaches. Please, provide one specific example (country, industry, product) where you believe the pro side for the protectionism approach would definitely make sense (from your perspective)! How exactly would the benefits outweigh losses in your example?

Answer 1

Free Tarde: - Free trade policy means the no tariffs, quantitative restrictions and other devices for obstructing. Prof. Jagdish Bhagwati says as absence of quotas, exchange restrictions, taxes, and subsidies on production, factor use and consumption.

Protectionist Trade: - protection trade refers to the domestic industries are to be protected from the foreign competition. The basic aim to impose the tariff and trade barriers to restrict the inflow of foreign goods and services and encourage the domestic industries.

Here I have one of the best example of protectionist trade and free trade.

Least Developed Countries and Infant Industry Argument.

The infant industry argument for protectionist trade is generally applicable to Least Developed Countries. They can have potential to of development and partially comparative advantage to develop in one particular commodity. But due to small initial level production and lack of technology and technical knowledge their initial production cost of the industry are high. Because of this scenario an industry is can’t develop in the face of foreign competition. Therefore, it is necessary to impose the tariff and other trade barriers, and give protection to an industry.

for ex. Suppose European Union having the policy of protectionist trade policy. They impose the tariff on the imported agricultural product to give more importance to their domestic farmers tp increase their produced items prices in order to increase their income.

Anti-Dumping Policy – Or we can say the protectionist trade policy, this policy is mainly imposed on the absolute advantageous country by Developing country. They are with their motive to capture the domestic market of developing country. Here case is India as developing country and china as absolute advantage country and they are exporting their cheap price goods and services to India and capture the domestic market of India. In this case India imposes the preotectionist trade and china is using the dumping policy.For ex. Chinese fire crackers, LED, Bulbs, cheap china electrical goods.