Economists generally support free trade, recognizing its potential to increase global production, consumption, and efficiency. However, certain arguments have been put forth to justify trade restrictions in specific circumstances. These arguments include:
Key Facts
- Protection of domestic industries: One argument for trade barriers is that they serve as a buffer to protect fledgling domestic industries. Initially, firms in a new industry may be too small to achieve significant economies of scale and could be overwhelmed by established firms in other countries[2].
- Strategic trade policy: Another argument for trade restrictions is based on the concept of strategic trade policy. This argument assumes an imperfectly competitive market and suggests that governments can assist firms seeking to acquire a dominant position in a new industry. This assistance can take the form of protectionist trade policies, research and development support, skill development programs, or subsidies.
- National security and the national interest: Some argue that trade restrictions are necessary to ensure a country’s national security and protect key products, materials, or technologies that have national security applications. However, critics point out that this argument can be weak and that decisions about what constitutes a key strategic material are often made by politicians rather than nonpartisan analysts.
- Job protection: The desire to maintain existing jobs threatened by foreign competition is a significant source of support for trade restrictions. However, using trade barriers to protect employment in a particular sector can be expensive and may prevent a country from enjoying the gains possible from free trade.
- Cheap foreign labor and outsourcing: Critics of free trade argue that it leads to the exploitation of workers in countries with lower wages. They suggest that trade restrictions are necessary to protect domestic workers from competing with cheap foreign labor. However, economists argue that wage differences generally reflect differences in worker productivity.
Protection of Domestic Industries
One argument for trade barriers is the protection of fledgling domestic industries, often referred to as infant industries. These industries may lack the economies of scale and resources to compete with established firms in other countries. Tariffs or quotas can provide a temporary buffer, allowing these industries to develop and become more competitive.
Strategic Trade Policy
Strategic trade policy is another argument for trade restrictions. This approach assumes an imperfectly competitive market and suggests that governments can assist firms seeking to acquire a dominant position in a new industry. This assistance can take various forms, such as protectionist trade policies, research and development support, skill development programs, or subsidies.
National Security and the National Interest
Some argue that trade restrictions are necessary to ensure a country’s national security and protect key products, materials, or technologies that have national security applications. However, critics point out that this argument can be weak and that decisions about what constitutes a key strategic material are often made by politicians rather than nonpartisan analysts.
Job Protection
The desire to maintain existing jobs threatened by foreign competition is a significant source of support for trade restrictions. However, using trade barriers to protect employment in a particular sector can be expensive and may prevent a country from enjoying the gains possible from free trade.
Cheap Foreign Labor and Outsourcing
Critics of free trade argue that it leads to the exploitation of workers in countries with lower wages. They suggest that trade restrictions are necessary to protect domestic workers from competing with cheap foreign labor. However, economists argue that wage differences generally reflect differences in worker productivity.
Despite these arguments, most economists maintain that the benefits of free trade outweigh the potential drawbacks. The gains from trade are substantial, and the costs of restricting it are high. Therefore, economists generally do not support trade restrictions.
References:
[1] Principles of Economics (https://open.lib.umn.edu/principleseconomics/chapter/17-3-restrictions-on-international-trade/)
[2] Reading: Justifications for Trade Restriction (https://courses.lumenlearning.com/suny-microeconomics/chapter/reading-justifications-for-trade-restriction/)
[3] Arguments for Restricting Trade (https://quickonomics.com/arguments-for-restricting-trade/)
FAQs
Why do some economists support trade restrictions?
Economists may support trade restrictions in certain circumstances, such as protecting fledgling domestic industries, implementing strategic trade policies, ensuring national security, protecting jobs, or addressing concerns about cheap foreign labor and outsourcing.
What is the argument for protecting domestic industries?
The argument for protecting domestic industries, often referred to as infant industries, is that they may lack the economies of scale and resources to compete with established firms in other countries. Tariffs or quotas can provide a temporary buffer, allowing these industries to develop and become more competitive.
What is strategic trade policy?
Strategic trade policy is an approach that assumes an imperfectly competitive market and suggests that governments can assist firms seeking to acquire a dominant position in a new industry. This assistance can take various forms, such as protectionist trade policies, research and development support, skill development programs, or subsidies.
Why might economists support trade restrictions for national security reasons?
Economists may support trade restrictions to protect key products, materials, or technologies that have national security applications. However, critics argue that this argument can be weak and that decisions about what constitutes a key strategic material are often made by politicians rather than nonpartisan analysts.
How do economists view trade restrictions aimed at protecting jobs?
Economists generally view trade restrictions aimed at protecting jobs as expensive and counterproductive. They argue that such restrictions prevent countries from enjoying the gains possible from free trade and can lead to higher prices for consumers.
What is the argument against trade restrictions based on cheap foreign labor and outsourcing?
Economists argue that trade restrictions based on concerns about cheap foreign labor and outsourcing are misguided. They point out that wage differences generally reflect differences in worker productivity and that free trade allows countries to specialize in producing goods and services where they have a comparative advantage, leading to overall gains from trade.