| Economists through years of study and practice have | | | | effectively retard international commerce than tariffs. |
| concluded that through free trade, based on the | | | | Non-tariff barriers (NTBs) refer to licensing |
| principal of comparative advantage, the world | | | | requirements, unreasonable standards pertaining to |
| economy can achieve a more efficient allocation of | | | | product quality and safety, or unnecessary |
| resources and a higher level of material well-being. On | | | | bureaucratic red tape in customs procedures. Great |
| the other hand, protectionism measures-barriers to | | | | Britain bars importation of coal this way. Finally, |
| free trade-lessen or eliminate gains from specialization. | | | | voluntary export restrictions (VERs) are a trade |
| Trying to satisfy diverse wants, nations shift | | | | barrier by which foreign firms "voluntarily" limit the |
| resources from efficient (low cost) to inefficient (high | | | | amount of their exports to a particular country. |
| cost) uses. This is the reason why, instead of | | | | But, when examining protectionism theory exceptions |
| promoting competition, governments turn up to face | | | | are apparent. Under proper conditions, the |
| monopolies that harm the economy and do not fulfill | | | | infant-industry argument stands as a valid exception, |
| the consumers' needs. | | | | justifiable on economic grounds. Moreover, on |
| Furthermore, the costs of protectionism are hidden | | | | political-military grounds, the self-sufficiency argument |
| because trade barriers are embedded in the prices of | | | | can be used to validate protection. But both |
| goods. Thus, either due to misunderstandings of the | | | | arguments are susceptible to severe abuses, and |
| gains of trade or due to political considerations, | | | | both neglect other ways of fostering industrial |
| governments may impose trade barriers, with | | | | development and military self-sufficiency. Most other |
| consequences such as higher prices, which can not be | | | | arguments are semi-emotional appeals; half-truths and |
| realized by the public at the beginning. | | | | fallacies. They see only the immediate and direct |
| No matter how compelling the logic for free trade, | | | | consequences of protective measures, and they tend |
| barriers do exist. Tariffs are excise taxes on | | | | to ignore the fact that in the long run a nation must |
| imported goods. They may be imposed for purposes | | | | import in order to be able to export. |
| of revenue or protection. Protective tariffs are | | | | In conclusion, the statement that can illustrate best |
| designed to shield domestic producers from foreign | | | | the protectionism delusion is that the gains trade |
| competition. Although they are usually not high | | | | barriers create for protected industries and their |
| enough to prohibit importation of foreign goods, they | | | | workers come at the expense of much greater |
| put foreign producers at a competitive disadvantage | | | | losses for the entire economy. The result is economic |
| in selling in domestic markets. Import quotas specify | | | | inefficiency. As historical evidence suggests, free |
| the maximum amounts of commodities, which may | | | | trade has led to prosperity and growth, while |
| be imported in any period. Thus, they can more | | | | protectionism has had the opposite effects. |