Protectionism marks an economic theory emphasizing minimization of free trade between nations. Many countries currently practice economic protectionism. Such countries believe that manufacturing of goods should take place in a country-wide, rather than a global setting. Nations may enforce protectionism through heavy tariffs of foreign goods, or higher taxation on foreign over domestic products.
. Protectionism may hold several advantages over the separate notion of free trade. Free trade marks a system in which a government minimizes control of importation of foreign goods. Protectionists argue that the theory of protected trade allows for small domestic industries to grow. They also note the advantages as lower taxation on domestic firms, lowered structural unemployment and less dumping of products into foreign markets. Protectionist may argue that small industries hold a greater chance of success in domestic markets versus world markets. Domestic markets may hold less competition than the greater pool of worldwide competitors. For example, an Indian technological firm may hold the advantage of cutting costs in a manner impossible for United States firms. A government holds the prime responsibility of leveraging taxes to cover incurred costs. A nation may tax foreign imports more heavily than domestic imports. An advantage of protectionism holds that foreign goods lacking taxation in a free trade system gain unfair advantage over domestically taxed firms. Such taxed domestic firms may turn to dumping, or selling products below cost in a foreign market to gain new customer bases. Domestic firms may not compete efficiently with foreign firm costs. This creates structural unemployment. Protectionism holds the advantage of less stringent local labor competition. This in turn may lead to greater national job growth in some areas of manufacturing. This higher production of goods may then lead to a more stable balance of traded goods in place of trade deficit. For more information, please see the links below. http://www.fff.org/freedom/0191b.asp or http://www2.econ.iastate.edu/classes/econ355/choi/prot.htm
