Debate Liberalization vs Protectionism
saARGUMENTS AGAINST TRADE LIBERALISATION: Trade liberalization has gained a strong foothold in this era of globalization but it is not an unblemished reality for most of the nations. So here are some views against trade liberalization which many critics of free trade believes as justified_ 1) The Senile industry argument: If industries are declining and inefficient they may require large investment to make them efficient again. Protection for these industries would act as an incentive to for firms to invest and reinvent themselves. However protectionism could also be an excuse for protecting inefficient firms. 2) To diversify the economy: many developing countries rely in producing primary products in which they currently have a comparative advantage. However relying on agricultural products has several disadvantages such as_ * Prices can fluctuate due to environmental factors * Goods have a low income elasticity of demand. Therefore with economic growth demand will only increase a little 3) Raise revenue for the government: import taxes can be used to raise money for the government however this will only be a small amount of money. 4) Help the Balance of Payments: Reducing imports can help the current account. However in the long term this is likely to lead to retaliation. 5) Cultural Identity: This is not really an economic argument but more political and cultural. Many countries wish to protect their countries from what they see as an Americanization or commercialization of their countries. 6) Protection against dumping: The EU sold a lot of its food surplus from the CAP at very low prices on the world market. This caused problems for world farmers because they saw a big fall in their market prices. 7) Environmental: It is argued that free trade can harm the environment because LDC may use up natural reserves of raw materials to export. Also