Ever since David Ricardo laid out the principle of comparative advantage in the early nineteenth century most economists have advocated free trade. That is, they have argued that government policy should not attempt either to reduce or to increase the levels of exports and imports that occur naturally as a result of supply and demand.

Despite the free-trade arguments of economists, however, many governments use taxes and other restrictions to limit imports. Less frequently, governments offer subsidies to encourage exports. Policies that limit imports, usually with the goal of protecting domestic producers in import-competing industries from foreign competition, are known as trade protection or simply as protection.

Let’s look at the two most common protectionist policies, tariffs and import quotas, then turn to the reasons governments follow these policies.