“Using real world examples, evaluate the extent to which protectionism may be justified in

international trade” (15 marks)

How do I approach the question?

• Be clear about what the question is asking you to evaluate, which in this case is the extent to
which protectionism may be justified when international trade takes place
• Define protectionism
• In an essay question like this, where you have not been given any guidance as to the number
of arguments you should present then the ‘magic number’ of three could be of use. When
possible, introduce three arguments for and three against is sufficient
• Ensure that you evaluate your points – ranking, arguments and counter arguments
• Conclusion that answers the question based on the previous points you have made
 “Using real world examples, evaluate the extent to which protectionism may be justified in
international trade” (15 marks)

There are several reasons why governments choose to impose protectionist policies when it
comes to international trade.

In many countries (especially ELDCs) there are infant industries which are yet to be fully
established in the global market. The need to protect these industries revolves around the
desire for export lead growth. Infant industries will find it difficult to compete in the
international market and even in their respective domestic markets without government
assistance.

The need for protectionism is also seen when it comes to declining industries. Declining
industries are industries that are unable to adapt to changes in demand patterns.
Protectionism allows such industries to survive longer and helps prevent large structural
unemployment.

Protectionism is also used as an anti-dumping strategy. Dumping is the situation where

imports are sold below their production costs. The government may intervene to protect
farmers for example from very cheap imported agricultural produce, such as sugar, which
would lower the demand for local produce.

The government may also see protectionism as a source of government revenue. Import
tariffs for example have the potential to provide a large part of the government budget.

The government may also use protectionism to lower the quantity of imports by using a
quota for example, in order to correct a chronic trade gap and improve the balance of
payments.

Lastly, many countries have strategic industries such as steel in the USA. The US
government protects this industry on the grounds of national security as steel is used for
many components involved in the US military.

However, there are a number of reasons why protectionist policies are criticized within the
field of international economics and these shall now be addressed.

The main argument is that protectionism results in a loss of advantages associated with free
trade, mainly comparative advantage. Comparative advantage is the situation where one
country can produce a certain good at a lower opportunity cost than another country which
serves to increase world supply in the long run. Losing comparative advantage could result
in global supply being maximized in the long run.

Another argument against protectionism is that governments may not be the best at
deciding on which industries to protect. As well as this, protecting industries leads to
inefficiency in the domestic market. Governments are going against the free-market forces
that encourage efficiency and the market distortion could lead to market failure.
“Using real world examples, evaluate the extent to which protectionism may be justified in
international trade” (15 marks)

Although protectionism is a form of anti-dumping, government intervention in free trade

can lead to dumping. For example, when governments subsidize a good, it may be exported
at a lower price than its actual production cost and harm importing nations’ industries.
Protection in trade can also hinder growth in ELDCs attempting to use export led growth
policies. If governments protect their local industries, such ELDCs will have small markets
and thus their policies may backfire.

The loss of free trade also results in a decline in the levels of economic competition on an
international scale. This sort of competition is important in improving efficiency of
producers around the world.

Lastly, government intervention in trade may lead to retaliation from affected nations and
this can cause political problems.

Protectionism has many advantages for local producers and consumers. However, on the
international scale, government intervention in trade is seen as an undesirable occurrence.