Question

Three arguments used to promote trade barriers are the national security argument, the infant-industry argument, and the dumping argument. Explain each of these arguments and evaluate whether each one has any flaws.

Answer 1

To promote trade barriers, three arguments are presented:

• National security argument: There are some industries in the economy which should be protected from the foreign companies as these industries are important to continue production in case of nation emergency. These could be oil industries, military equipments etc. According to me in these industries the country should be self reliant, believing on someone else in case of emergency can lead to harmful effects. Due to this reason, a nation imposes some barriers on foreign companies to stop growing in domestic market.
• Infant industry argument: There are many new industries coming with time in an economy or with technological advancement. Lets say electric scooters have been launched in USA in 2000 and in India 2005. Till 2005 USA market have been developed in gained their domestic market and in 2005 Indian market is infant as they just developed the product. In this case there are trade barriers to protect Indian market from USA products as this will leads to stopping Indian firms to grow.
• Dumping argument: It is the situation when the foreign market sell their products at lesser prices in international market than domestic prices to gain customers or to have maximum benefit. If they are using strategy to attract customers, there are trade barriers.

Each one of them many flows but from a country perspective there are not because every country wants to protect their domestic market to protect their nation people or to provide them some basic amenities by providing saving their employment.