Protectionism

This chapter considers the flip side of the case on free trade, in which trade interventions are often misguided and costly. It analyzes tariffs and quotas on imports that inefficiently redistribute income from consumers to producers. It points out how trade barriers produce a net economic loss due to the costs of consumers exceeding the benefits to producers and reduce exports that harm downstream user industries. The chapter also addresses the question of why trade protectionism is often politically attractive. It examines situations in which protection may be justified in theory, even if governments might be ineffective in trying to take advantage of those situations.