LESSON – 34Non Tariff Trade Barriers and New ProtectionismLearning outcomes
After studying this unit, you should be able to:
Define Free Trade
Know Non tariff Trade Barriers and Protectionism
Arguments for free trade and protectionism
Know the demerits of protectionism
Identify the fall and rise of protectionism
Free Trade Versus Protection
Free trade refers to the trade that is free from all artificial barriers to trade like tariffs,quantitative restrictions, exchange controls, etc. Protection, on the other hand, refers tothe government policy of according protection to the domestic industries from foreigncompetition. There are a number of arguments for and against both free trade and protection.(ii) Under free trade, division of labour occurs on an international scale leading to greater specialisation, efficiency and economy in production.
ARGUMENTS FOR PROTECTION
Theoretically speaking, free trade has certain virtues, as we have seen above. But, inreality, government are
ARGUMENTS FOR FREE TRADE
The important arguments in favour of free trade are as follows:(i) Free trade leads to the most economic utilisation of the productive resources of theworld because under free trade each country will specialise in the production of thosegoods for which it is best suited and will import from other countries those goods whichcan be produced domestically only at a comparative disadvantage.(Iii) As there will be intense competition under free trade, the inefficient producers arecompelled either to improve their efficiency or to quit.(Iv) Free trade helps to break domestic monopolies and free the consumers fromexploitation.(v) Free trade benefits the consumers.in different ways. It enables them to obtain goodsfrom the cheapest source. Free trade also makes available large varieties of goods.(v i) Further, under free trade there is no much scope for corruption which is rampantunder protection.