Accounting Instruction, Help, & How To (Financial & Managerial)

Protectionism refers actions taken by a country to protect the countries domestic industries from foreign competition, protectionist policies including taxes, tariffs, and quantity restrictions. There are many arguments for restricting international trade, one argument being that trade reduces the number of jobs in the U.S.

Because of the many benefits of specialization and trade most economists believe we need to consider the costs and benefits of restricting trade very carefully. It is widely thought that specialization and trade are the keys to the massive increases in prosperity over the last few hundred years and these benefits need to be compared with the costs of restricting trade.

It is certainly true that trade reduces jobs in certain industries and this can have a significant impact on many areas of the country and these areas have a strong incentive for trade restrictions but from a larger perspective countries pay for imports by trading what they produce. Economists argue that free trade will shift production to areas where a country has a comparative advantage resulting in greater efficiency, greater production, and therefore more potential for consumption overall. Changes in the economy can be tough for many areas, however, and can be destructive to entire industries. Economists use the term creative destruction, a term coined by Joseph Schumpeter” to refer this constant change, change that can cause a lot of problems in many areas but which may lead to greater prosperity overall.

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