Isn’t free trade how all the world’s developed countries have become rich?

Recap: Protectionism

• What is protectionism?
• What are the three main types of protectionism?
• Can you name other types of protectionism?
• What are the effects of a tariff on different stakeholders?
• How is the effect of a quota on stakeholders different from a tariff?
• How is the effect of a subsidy on stakeholders different from a tariff or quota?

Why do countries restrict trade?

As can be seen in our analysis on the previous slides, protectionism always leads to a loss of total welfare (or deadweight loss) for in the protected industries. So why do countries still practice it? Here are some of the arguments for and against protectionism.

The decline in manufacturing jobs has become an issue.

Many in the US, Europe and Japan have seen no increase in their household income in the past 10 years.

Critics argue that the benefits of globalisation have been shared by only a few in many societies

Arguments for and Against Protectionism

As can be seen in our analysis on the previous slides, protectionism always leads to a loss of total welfare (or deadweight loss) for in the protected industries. So why do countries still practice it? Here are some of the arguments for and against protectionism.