Reasons for / advantages of trade protection

1. ELDC diversification

1.1. A low income country that faces severe structural barriers to sustainable economic development.

1.2. ELDC stands for economically least developed country

1.2.1. These tend to have low levels of human capital and are highly vulnerable to shocks

1.2.2. There are 47 of these

1.2.3. They mostly specialize in production of a small range of goods and services in the primary sector

1.3. In order to achieve economic activity, an ELDC wishes to diversify production by:

1.3.1. Specializing in manufacturing in the secondary industry

1.3.2. Trade protection is used to avoid the risks of over-specialization

2. Protection fo jobs

2.1. Job losses are created when domestic consumers buy foreign goods, meaning that the demand for labor of that good in the industry lowers.

2.2. Trade protections are established since job losses affects the whole population in a chain of events that affect the income flow heavily.

2.3. Some economists say that in the long run the economy will be more efficient due to the international trade that is occurring, and it is merely a correction of the failed current domestic market.

2.4. An idea that can be highlighted is that while jobs will be lost, goods will lower in price due to the world price being lower, his means that consumers will be affected in a negative and positive way.

3. Generating government revenue

3.1. Government in need of additional revenue may regard tariffs as an opportunity to gain this source of public sector income.

3.2. Governments will target industries that have a low price elasticity in order to raise tariffs and generate more revenue.

3.3. Luxury goods can have tariffs raised since they are bought by high income individuals that will be less affected.

3.4. The negative impact that is generated is that if tariffs are heavily imposed in different markets, there will be a high unbalance in the efficiency of the industries.

4. Balance fo payments correction

4.1. A financial record of a country's transactions with the rest of the world over the course of a year.

4.2. A balance of payments in seen in currencies since an equilibrium is created from the debits and credits in the accounts of the balance of payments will be equal

4.3. An imbalance is created from a currency that is not freely floating, if it is managed/manipulated by others. This creates an argument for governments to intervene by protecting demand for domestic products.

5. Protection of infant industries

5.1. Are usually new or unestablished industries that have the potential to achieve a comparative advantage, but are too underdeveloped to compete with foreign firms.

5.2. These industries tend to need government protection. There is an argument of an unfair advantage for stronger economies that have the opportunity to push there economy much further than others

5.3. Another piece of criticism given to these industries is that they are protected for too long, which means this advantage is pretty subjective.

6. Unfair competition

6.1. Because every economy is different, countries may seem to dump into foreign markets, due to there being a lower cost of production.

6.2. Domestic producers are only disadvantaged when a product is imported at a lower cost of production.

6.3. Making a country union creates even further unfair conditions since countries who aren't members have an even more unreachable condition.

7. Anti-dumping

7.1. Dumping is the sale of products by foreign firms at a price lower than the cost of production.

7.2. Protection is needed to prevent this dumping, also, when foreign producers flood the market with a product which is produced at a lower cost, domestic producers cannot compete.

7.3. It is a major problem when large foreign multinational companies dump into domestic markets since they take complete control of the industry.

8. Environmental Standards

8.1. Environmental protection has become a big standard to fill for industries so production facilities relocate with the purpose of avoiding strict rules. This makes it especially tough for small companies who didn't relocate and are still working locally with strict fines and rules

8.2. In order to prevent this, the government can implement tariffs on the same products that have environmental risks and thus will help the environment and domestic producers.

9. Health and Safety

9.1. Due to governments having different standards of health and risk involving certain products, protection against those products is implemented such as foreign technology that may seem dangerous.

9.2. Should the product not meet the standards of health and safety the product is completely banned.

10. National Security

10.1. Since governments may be in need of industries surrounding war and different battles, industries like arms manufacturing need to remain.

10.2. This is essential to have a domestic supply of since in times of international conflict, supply may be completely cut off.

10.3. Countries that have a large production industry of these dangerous products might benefit heavily in dangerous times since they have an upper hand, economically.