Question

Discuss the advantages and disadvantages of protectionist policies to domestic industry.

Answer 1

Protectionism means protecting domestic industries from foreign competition by imposing tariffs and quotas or offering subsidies to domestic companies.

Protectionism helps protect domestic industries and helps in protecting jobs in the domestic country.

The disadvantages of protectionist policies are : higher prices for the commodities and services that are            protected, smaller market because other countries will retaliate, the domestic work will fail to innovate as foreign competition is wiped out.

On the other hand, free trade is trade without barriers. All the participating countries benefit under free trade as developed countries have access to the huge consumer market of developing countries. Developing countries, on the other hand, can also expand their market and improve technology. Free trade leads to higher investment, greater productivity and higher GDP for all participating countries.