Chapter 18.3, Problem 4R

To determine

To discuss: The reason protectionist argue for protected trade.

Explanation of Solution

Protectionist are the people who stand and argue for protected trade. They believe that trade restrictions shall exists so that domestic industries can be encouraged. Free trade increases the competition in a country which ultimately eliminates the domestic producers.

Following are three arguments against free trade that have been raised by protectionist:

1. If foreign firms sell goods at lower prices in the country then it will ultimately lead to many workers in domestic countries being unemployed.
2. They believer industries should be protected from free trade such as oil, gas etc.
3. It is necessary to control trade for infant industries as free trade will increase the competition in the market. If trade is protected then small industries will get a chance to grow and become strong in the market.