Arguments for and against protectionism

November 2, 2009 annay17

Arguments for Protectionism

To safeguard domestic employment

Although protectionism makes the economy more productive and efficient, protectionism does not take in consideration the quality of life. The lower the import is, the greater the aggregate demand, and so the higher the level of GDP and employment. AD = C + I + G + (X-M).

Arguments against Protectionism-

Besides the most obvious argument against protectionism, the inefficiency of resource allocations, there is another argument which shows how harmful protectionism can be.

Bureaucracy – many protectionist measures are very bureaucratic to enforce. Protectionism can lead to corruption as government officials fight for a chance to be a producer in a highly competitive market.

quotas

If quotas are imposed to limit the number of imports on goods, it increases the price, and produces a windfall gain for the foreign suppliers who can still supply their goods to the consumers in that country. Therefore the foreign suppliers want to be the ones who are able to supply to the country, as there is a lot of benefit. To become a foreign supplier, they may try to bribe the country, and so the government officials may become corrupt.