Case for Protection –
By protection we mean in order to save the domestic industries from low priced imports of well established foreign industries some barriers against import of foreign goods are imposed. Some arguments given in defense of protection are irrational and invalid and some are valid.
Arguments in favor of protection –
1. Nationalism –
Most popular argument for protection is that the people of a country should buy products of their domestic industries rather than foreign products to show their nationalistic feeling or patriotism.
In India, a recent campaign named ‘Swadeshi’ appeals to the Indian people’s patriotic feeling that they should protect their indigenous industries and impose barriers on imports of foreign goods and provide subsidies to domestic industries.
This argument is invalid.
The restrictions imposed on trade in the name of nationalism are contrary to the national interests because they promote inefficiency and prevents rapid economic growth.
2. Employment Argument –
Employment argument says that it will lead to increase in domestic employment or at least preserve current domestic employment. It is often believed that the imports from abroad will reduce employment, so instead of importing goods from foreign we should produce those goods in our own country, then employment will increase. As the prices of imported goods are lower, the domestic producers would not be able to compete with them and this will destroy even present jobs in the domestic industries. So, it is concluded that protection of domestic industries will lead to their expansion and increase employment in the country.
This argument for protection is not logical and valid because this argument ignores the adverse effects of protection on domestic industries. If imports are restricted by imposing barriers, the exports will also be affected.
When one country restricts imports to protect domestic industries, then other countries are likely to retaliate and will impose restrictions on that country’s exports. This will reduce exports and cause reduction in employment in export industries.
3. Infant Industries Argument –
4. Anti Dumping Argument –
5. Correcting Balance of Payment Deficit –
6. Redistribution of Income –