Protectionism

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Protectionism is the economic policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports, and prevent foreign take-over of domestic markets and companies.

This policy contrasts with free trade, where government barriers to trade and movement of capital are kept to a minimum. In recent years, it has become closely aligned with anti-globalization. The term is mostly used in the context of economics, where protectionism refers to policies or doctrines which protect businesses and workers within a country by restricting or regulating trade with foreign nations.

Contents

History

Historically, protectionism was associated with economic theories such as mercantilism (that believed that it is beneficial to maintain a positive trade balance), and import substitution. During that time, Adam Smith famously warned against the 'interested sophistry' of industry, seeking to gain advantage at the cost of the consumers.[1]

Most modern economists agree that protectionism is harmful in that its costs outweigh the benefits, and that it impedes economic growth.[2][3] Economics Nobel prize winner and trade theorist Paul Krugman once famously stated that, "If there were an Economist’s Creed, it would surely contain the affirmations 'I understand the Principle of Comparative Advantage' and 'I advocate Free Trade'."[4]

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