We have shown in this chapter how to use demand and supply curves to analyze trade and the costs of trade protectionism.

Restrictions on trade waste resources by transferring production from low-cost foreign producers to high-cost domestic producers. Restrictions on trade also prevent domestic consumers from exploiting gains from trade with foreign producers, creating deadweight losses. Domestic producers can benefit from trade restrictions, but domestic consumers lose more than the producers gain. Trade restrictions sometimes persist because the benefits from restrictions are often concentrated on small groups who lobby for protection, while the costs of restrictions are spread over millions of consumers and can be small for each individual.

We have set out various common arguments for restricting trade. Some of these arguments are valid, but they are usually of limited applicability