Merits (Advantages /Arguments) for Protectionism
- It encourages the exploitation and utilization of domestic idle resources. This is because protectionism against imports increases aggregate demand for the locally produced commodities. This increases the productive capacities in the economy hence economic growth and development.
- 2. It helps to control dumping. Dumping refers to selling of commodities in foreign market at a high price as compared to the price charged in the domestic market This discourages production in the country where commodities are dumped hence the need for protectionism.
- It helps to raise government revenue. This is realized from the tariffs imposed and trade licenses issued in the process of protectionism. The revenue is used to finance government re- current and development expenditures
- It facilitates the development of domestic infant industries. Infant industries produce at high costs and their products are of poor quality. Therefore, there is need to protect-such industries from competing with the cheap high quality imports in order to enable them to develop.
- For Health reasons. Protectionism discourages the importation and consumption of harmful and dangerous imports by the local population. Such commodities are in form of expired drugs, food stuffs and other substandard commodities.
- 6. It helps to control imported inflation. Trade restrictions are used to reduce on the importation of commodities from countries affected by inflation hence controlling imported inflation.
- It improves the balance of payment position of the country. Protectionism encourages the production of formally imported commodities locally through the establishment of import substituting industries. This reduces expenditure on imports hence improved balance of payment position.
- It saves the scarce foreign exchange earnings of the country. Protectionism encourages the production of formerly imported commodities locally. This reduces foreign exchange outflow hence accumulating foreign exchange reserves.
- It increases employment opportunities. Through protectionism, the money which would be spent on imports is diverted to the consumption of domestically produced commodities. This increases domestic production and other economic activities hence creating more employment opportunities.
- It leads to the development of social and economic infrastructure. Protectionism promotes the development of the social and economic infrastructures in form of roads, schools, hospitals, financial institutions etc. required for import substituting industries.
- It promotes self-sufficiency and reliance of the economy. Protectionism encourages the production of a number of formally imported goods and services locally. This leads to increased self-reliance and sustenance of the economy hence reducing the problem of foreign dependence.
- It facilitates the development of skills for local entrepreneurs. This promotes managerial capacity building through on job training and helps to reduce government expenditure on training costs.
- For retaliation purposes. Some countries impose restrictions to retaliate against restrictions made by other countries on their exports.
- National security argument. A country may impose restrictions on the importation of certain commodities for security reasons .For example restricting the importation of fire arms for security purposes.
- For political purposes. Trade restrictions can be used to promote and achieve political objectives. For example African countries managed to reduce apartheid rule in South Africa by imposing trade embargoes on the South African government of that time.
CATEGORIES Economics
TAGS Dr. Bbosa Science
