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
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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
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