6.2.1—Protectionism

Protectionism is government action that restricts or makes imports more expensive, or supports domestic producers relative to foreign competitors.

Governments may seek to protect jobs, support infant industries, improve bargaining power or address a strategic concern. The policy changes prices, quantities and incentives, so the domestic gain must be weighed against consumer costs and retaliation.

A tariff raises the domestic price above the world price, reducing imports and increasing domestic supply, but consumers lose purchasing power and some mutually beneficial trades disappear.

Protectionism is not the same as any trade regulation: a safety standard may be non-discriminatory, while a protectionist measure deliberately shields domestic output.