Routledge Dictionary of Economics, Second Edition
Barriers to the international flow of goods and services. The protectionist measures available include TARIFFS, import quotas and trade regulations (e.g. concerning quality). Because protection is a departure from FREE TRADE, after the MERCANTILISTS advocated it, it was attacked by economists for its effect on the allocation of goods and services, but temporary protection has been conceded by many economists to be useful as a means of encouraging INFANT INDUSTRIES.
An analysis of the effects of protection on a national economy includes the changes in domestic production and consumption patterns and switches between foreign and domestic markets, with the consequence that employment increases at the cost to consumers of having to spend more to purchase higher priced domestically produced goods. Developing countries with small export industries and thus fewer ECONOMIES OF SCALE, sometimes have lower GROSS NATIONAL PRODUCTS as a consequence of protection.
It is measured by either the gross or net rate of protection, the latter taking into account both exports and imports. The cost of increasing employment through increasing domestic production can be measured as the ‘cost per job’, which is the increase in the amount of consumer expenditure to obtain the same amount of goods divided by the increased number of jobs in protected industries.
Although in times of recession, protectionist policies are popular, most lead to a reduction in world income. Despite many nations adhering to liberal trade policies, a variety of covert practices and agreements are used to protect domestic industries.
See also: effective rate of protection; Multi-Fibre Arrangement; non-tariff barrier; Smoot-Hawley Tariff Act; tariff; voluntary export restraint
References
Belassa, B. and associates (1971) The Structure of Protection in Developing Countries, Baltimore, MD: Johns Hopkins University Press.
Corden, W.M. (1971) The Theory of Protection, Oxford: Clarendon Press.
Kierzkowski, H. (ed.) (1987) Protection and Competition in International Trade: Essays in Honor of W.M. Corden, Oxford: Basil Blackwell.
Shutt, H. (1985) The Myth of Free Trade: Patterns of Protectionism since 1945, Oxford: Basil Blackwell.
This is the complete article, containing 319 words
(approx. 1 page at 300 words per page).
View More Summaries on Protection
