Level: SL and HL
Protection reduces efficiency, yet almost every country uses it. This topic sets out the arguments governments use to justify protection, the case against it, and how to weigh free trade against protection.
| Argument | Explanation | Example |
|---|---|---|
| Protection of infant industries | New industries have high average costs until they grow and gain economies of scale and experience. Temporary protection lets them survive until they can compete. | South Korea protected its car and steel industries in the 1960s–80s; Hyundai and POSCO later became global exporters |
| National security | Some industries (defence, energy, food, semiconductors) are strategic; a country should not depend on possibly hostile suppliers. | US tariffs on steel and aluminium imports from 2018 were justified on security grounds; India's push to make defence equipment at home |
| Health, safety and environmental standards | Imports may not meet domestic standards for safety, health or the environment. | EU bans on hormone-treated beef; India's quality control orders on toys |
| Anti-dumping | Dumping is selling exports below cost or below the price charged at home. Anti- dumping duties protect domestic firms from unfair, predatory pricing. | India imposes anti-dumping duties on many Chinese imports, including steel products and chemicals |
| Unfair competition | Foreign firms may benefit from subsidies or very low labour or environmental standards. | EU duties on Chinese electric vehicles (2024), citing state subsidies |
| Balance of payments correction | Reducing imports can lower a current account deficit. | India restricted gold imports with higher duties in 2013 to reduce its current account deficit |
| Source of government revenue | Tariffs are easy to collect, which matters where income tax collection is weak. | Customs duties are a significant share of tax revenue in many low-income countries |
| Protection of jobs | Protection keeps domestic firms in business and saves jobs in import- competing industries. | Protection of textile and steel jobs in many countries |
| Economically less developed country diversification | A country dependent on one or two primary exports may use protection to build up manufacturing and diversify. | Ethiopia's support for its leather and garment industries |