What Are The Disadvantages Of Trade Protectionism?


4 Answers

Joe McHugh Profile
Joe McHugh answered
Trade protectionism has several disadvantages, the most significant of which are the strains it places on the very principles of free trade. Further disadvantages are the protections it offers to firms that compete on a platform of price over quality, the false sense of security that it builds and the denial of easy access to certain products for consumers.

At the core of protectionism are tariffs, duties, inventory quotas and any other measures designed to restrict the import of foreign goods in interest of protecting domestic companies form foreign take-overs. Additionally, some governments provide subsidies and loans to businesses that are failing to compete against their foreign competitors. These actions shackle the free market by offering benefits to domestic companies while imposing consequences upon foreign businesses. Some people consider trade protectionism to be a step toward anti-globalisation for this very reason.

Consumers pay more with protectionism too. Without a system of competitive pricing, domestic companies are free to raise their prices without raising the quality of their goods. Put more simply, when a business is without competition then the consumer is without options.

Businesses suffer from protectionism as well, though theirs is more of a head-in-the-clouds brand of suffering. Government support often builds corporate complacency, which in turn could lead a business to believe that it has a nice safety net set up behind it. In the event of strong foreign competition, these businesses might not have the resources necessary to survive on their own.

Finally, trade protectionism limits consumer access to foreign goods and non-domestic companies that offer unique products and services are also subject to the aforementioned restrictions.

Foreign businesses and domestic consumers face the greatest disadvantages of trade protectionism. Businesses face unfair restrictions while their domestic competitors are offered financial boons, and consumers end up paying higher prices for a limited variety of products that aren't always worth their cost.
Akila Weerasinghe Profile
The biggest disadvantage is that when one country imposes trade barriers on another country the other country retaliates by imposing barriers on the 1st country.
Aisha Profile
Aisha answered
Following are the disadvantages of Trade protectionism:
- The customers are not able to get the competitive prices. Instead they would have to buy what the home industry is producing.
- Quality of products suffer as there is no competition.
- Home industry gets extremely non-competitive.
- Trade protectionism is a great barrier for companies that are willing to expand to other countries and are stopped due to these barriers.
- Smuggling and other unfair means tend to get boost as people like smuggled better quality products.
Anonymous Profile
Anonymous answered
1) Welfare losses for consumers (e.g.) A consumer in Britain can't get their Brazilian coffee cheaply.
2) Higher raw material costs for domestic firms
3) Threats of retaliation in the form of Trade Embargoes or other Tariffs.

Answer Question