4.3 Arguments for and Against Free trade Flashcards
1
Q
What are some arguments against free trade?
A
- Domestic production falls
- Unemployment increases
- GDP falls (as import is a leakage)
- Government revenue falls (corporate, income and indirect tax falls, whilst unemployment benefits increase)
- Sunrise industries –> new emerging industries must be protected from competition from imported goods
2
Q
What are some arguments against protectionism? (FOR free trade)
A
- Protectionism (tariffs..) distort prices
(has an effect on resource allocation) - Reduces chance of retaliation and political tension
(if protectionism is imposed, retaliation is likely) - Protectionism limits imports and thus also choice for consumers