Arguments for Trade Protection

Advocates for tariffs and import quotas offer a variety of arguments. Three common arguments are national security, job creation, and the infant industry argument.

The national security argument is based on the proposition that overseas sources of goods are vulnerable to disruption in times of international conflict; therefore, a country should protect domestic suppliers of crucial goods with the aim to be self-sufficient in those goods. In the 1960s, the United States—which had begun to import oil as domestic oil reserves ran low—had an import quota on oil, justified on national security grounds. Some people have argued that we should again have policies to discourage imports of oil, especially from the Middle East.

The job creation argument points to the additional jobs created in import-competing industries as a result of trade protection. Economists argue that these jobs are offset by the jobs lost elsewhere, such as industries that use imported inputs and now face higher input costs. But noneconomists don’t always find this argument persuasive.

Finally, the infant industry argument, often raised in newly industrializing countries, holds that new industries require a temporary period of trade protection to get established. For example, in the 1950s many countries in Latin America imposed tariffs and import quotas on manufactured goods, in an effort to switch from their traditional role as exporters of raw materials to a new status as industrial countries.

In theory, the argument for infant industry protection can be compelling, particularly in high-tech industries that increase a country’s overall skill level. Reality, however, is more complicated: it is most often industries that are politically influential that gain protection. In addition, governments tend to be poor predictors of the best emerging technologies. Finally, it is often very difficult to wean an industry from protection when it should be mature enough to stand on its own.