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In: Economics

What are the problems with the argument of “maintain domestic employment” for trade protection? need answer...

What are the problems with the argument of “maintain domestic employment” for trade protection? need answer in 200-250 words.  

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Expert Solution

Trade protectionism refers to policies the government uses to prevent unfair competition from foreign industries. Policies mainly include:

  • Tariffs
  • Quotas
  • Subsidies
  • Currency manipulation

These policies may create temporary jobs for the industry, which is in protection while other sectors are still forced to contract. If we check, it can be found that even the protected industry cannot employ in the long run. This is mainly because the cause of this problem is still there. This can be said to be a political measure as products become more costly in the long term. This makes them less competitive than foreign industries, which ultimately destroys the industry.
Most industries that suffer from unemployment are industries with wages far over nonunion market compensation. This high wage is by labor unions who enforce them through restriction thereby creating unemployment. They call for trade protection policies from the government to create more competition and more unemployment.

Trade barriers exist today because workers believe that it protects their wage rate from low-cost labor competition. But that is not the case. It destroys more jobs than it creates in the long run. That is where the concept of free trade needs to be introduced, but this can only be applicable between countries of similar wages.

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