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Trade protection - Coggle Diagram
Trade protection
Arguments in favor
National security
Some industries must be protected by the government as certain goods are essential for national defense and should be produced domestically, in case of wars or other national emergencies.
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Anti-dumping
Dumping refers to the practice of firms selling products in foreign markets at below cost prices or prices set below their own domestic market.
Dumping often occurs when firms experience excess supply or excess subsidies resulting in the selling of goods at very low prices abroad. To combat this, governments often impose trade protectionist measures known as anti-dumping measures to prevent domestic firms from closing down or workers losing their jobs, due to ‘unfair trade practices’.
Unfair competition ⭐️
A currency devaluation gives exporting countries a competitive advantage by making exports cheaper and imports more expensive.
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Government revenue ⭐️
If the government’s primary objective is to raise revenue, they may impose higher taxes on goods and services which have inelastic demand.
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Protection of job ⭐️
shifting consumer expenditure in order to increase domestic production and consumption. However, this comes at a cost of lower efficiency and a global misallocation of resources.
In the long run, it may be more suitable for governments to use supply side policies to increase the competitiveness of firms.
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