4.3 Arguments for and against trade protection

• Free trade

  International trade without restrictions or tariffs on goods and services.
• Protectionism

  Economic policy of restricting trade through methods such as tariffs and quotas to protect domestic industries.
• Infant industry

  A new industry that is often unable to compete against established competitors without government support or protection.
• Economies of scale

  The cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit decreasing with increasing scale.
• Dumping

  Selling goods in a foreign market at a price lower than the cost of production or below the domestic price.
• Intellectual property

  Legal rights over creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images.
• Balance of payments

  Record of all economic transactions between a country and the rest of the world over a specific period.
• Misallocation of resources

  Inefficient allocation of resources that occurs when resources are not used in the most productive way.
• Protection of infant (sunrise) industries

  Supporting new industries to protect them from foreign competition until they can compete independently.
• National security

  Protecting domestic industries that are vital for national defense and security.
• Health and safety

  Ensuring imported goods meet domestic health and safety standards to protect consumers.
• Environmental standards

  Implementing trade barriers to prevent the importation of goods that do not meet domestic environmental regulations.
• Anti-dumping

  Imposing tariffs on foreign goods that are sold below their fair market value to protect domestic producers.
• Unfair competition

  Preventing foreign firms from gaining an unfair advantage through subsidies or other means.
• Balance of payments correction

  Using protectionist measures to correct a trade imbalance in the balance of payments.
• Protection of jobs

  Protecting domestic employment by limiting imports that could lead to job losses.
• Economically least developed country (ELDC) diversification

  Encouraging diversification of industries in the least developed countries to reduce dependence on a single sector.
• Retaliation

  Other countries imposing similar protectionist measures in response to a country's trade barriers.
• Increased costs

  Protectionism can lead to higher prices for consumers due to reduced competition and higher production costs.
• Less choice

  Restricting trade can limit the variety of goods available to consumers.
• Lack of incentives for domestic firms to become more efficient

  Protectionism can reduce the pressure on domestic firms to improve efficiency and competitiveness.
• Reduced export competitiveness

  Trade barriers can make domestic goods less competitive in international markets.