International Business

What Is Protectionism In International Trade?

Protectionism or simply Protection refers to the policy of the government under which the government puts various restrictions on the free movement of goods between the countries, in order to protect its domestic industries from foreign competition. The policy may also be known as Restrictive Trade Policy because various restrictions are imposed for encouraging the domestic industries. Protection may be given by either of the following ways —

  • Imposing high duties and levies on imports,
  • Giving concessional treatment for the exports by allowing exporting industries concessions in taxes and duties or giving subsidies.
  • Making necessary resources available to home industries either by imports or by developing national resources.
  • Reserving national resources for home industries.
  • Discouraging the use of foreign products and encouraging home industries by making the credit and marketing facilities available to them.

Thus protectionism ensures the protection of home industries from foreign competition, encouraging them to raise production and generate more employment opportunities in the economy. For this purpose government imposes a number of restrict ions on imports and exports of the country through fiscal and other economic measure.

Today, almost all the countries of the world have abandoned the policy of free trade and have adopted the protection policy or Protectionism to save Infant Industries. The infant industry argument is the strongest argument in favor of the protection policy. An infant industry is one which has been started lately and which has not gained the strength necessary to face foreign competition. Old and well established industries necessarily have an edge ever the newly started industries because they can have a good fight against foreign competition.

Therefore, infant industries need Protection. The protection may not be given on permanent basis. It is only for the time being till the industries become strong enough to face foreign competition. The policy has been expressed as ‘Nurse the Baby’.

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