Protectionism and International Trade

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tax revenue gain from a tariff will instead be distributed to those who receive import licenses.

There are both arguments for and against protectionism.

Arguments for protectionism:

Protecting domestic employment: At every time in an economy there will be some industries which are in decline because they cannot compete with foreign competition. If the industries are large, this will lead to high levels of structural unemployment and governments often attempt to protect the industries in order to avoid unemployment

Protecting infant industries: The domestic industry will not be competitive against foreign imports until it can gain the cost advantages of economies of scale. Because of this it is argued that the industry needs to be protected against imports until it achieves a size where it is able to compete on an equal footing.

To raise government revenue: In many developing countries it is difficult to collect taxes and so governments impose tariffs on products in ...

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