Other examples include allegations that China has been dumping excess supply of steel on global markets causing other firms to go out of business. The EU sold a lot of its food surplus from the CAP at very low prices on the world market this caused problems for world farmers because they saw a big fall in their market prices. Many countries wish to protect their countries from what they see as an Americanisation or commercialisation of their countriesĭumping occurs when a country has excess stock and so it sells below cost on global markets causing other producers to become unprofitable. This is not really an economic argument but more political and cultural. However, in the long-term, this is likely to lead to retaliation and also cause lower exports so it might soon prove counter-productive. Reducing imports can help the current account as it restricts imports. Import taxes can be used to raise money for the government – however, this will only be a relatively small amount of money Therefore with economic growth demand will only increase a little. Goods have a low-income elasticity of demand.Prices can fluctuate due to environmental/weather factors.However, relying on agricultural products has several disadvantages They currently have a comparative advantage. Many developing countries rely on producing primary products in which However, protectionism could also be an excuse for protecting inefficient firms Protection for these industries would act as an incentive to for firms to invest and reinvent themselves. If industries are declining and inefficient they may require significant investment to make them efficient again. Protection would allow developing industries to progress and gain experience to enable them to be able to compete in the future.This shows that comparative advantage can change over time.However, if they invested in the industry then in the future they may be able to gain comparative advantage. If developing countries have industries that are relatively new, then at the moment these industries would struggle against international competition. These include when developing economies need to develop infant industries and develop their economy.
However, in some circumstances, there are arguments in favour of trade restrictions.
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