05.+Reasons+for+protection

Reasons for Protection: Infant Industry Argument (Andrea) Infant industries which operate to the far left of the long run average curve, need to be protected as their smaller scale and higher prices hinder their ability to compete with established firms on the international market. Under protection, these firms will mature and increase their scale of production approaching the technical optimum. In affect per unit costs of production will reduce and firms will experience internal economies of scale. Taking advantage of cost saving advantages such as bulk buying, specialization of labour, increased investment into capital and further research into development and research will effectively lead to higher efficiency and productivity resulting in the firm becoming internationally competitive. For this reason, protection can be removed once ‘maturity’ is reached. Domestic Employment (Christina)  The most favoured argument of having protection is for the reason that it saves local jobs. It is understood that if local producers are protected from competition with cheaper foreign imports the demand for local goods would be greater and inturn increase the amount of domestic employment. This argument sounds even more convincing during times of economic downturn when unemployment is rising and the protection of domestic employment is necessary in a time where certainty is needed, for such uncertain times. However, this point is frown upon amongst economists in which believe that protection will distort the allocation of resources in an economy of more efficient production towards an area of less efficient production. In saying this, the economic state in the the long run will cause employment to decline and growth rates to substantially drop. The point again can also be argued differently in that, if countries protect their industries, it may be possible that other countries may retaliate and adopt similar protection policies. The net result of this could be that employment would be maintained in its less efficient protected state but a loss of employment in more efficient export industries will occur. Depending all on economic conditions there should be a balance of both these protection methods in order for the success of an economy. Dumping (Terrasia) Dumping is an informal name for the practice of selling a product in a foreign country for less than either the price in the domestic country, or the cost of making the product. It is illegal in some countries to dump certain products into them, because they want to protect their own industries from such competition. the only positive outcome of dumping is that there will be lower costs for consumers but this is not permanent. after the local competiton is exterminated forigen competitors will put up thier prices. Defence (Prathik) Countries may generally want to retain their own defence industires so that they can be confident in times of war that they would be able to produce their own military equipment. Countries tend to to do this so that they are not reliant on other nations for military equipment, therefore seek means of producing defence equipment domestically to avoid any incompetence in times of war and that they are stil able to produce defence equipment during times of war. Self Sufficiency (George) Self sufficiency is the argument where economies prefer to protect their industries in order to reduce their reliance on foreign countries. The industries which will be subject to protection will generally be those providing necessities such as agriculture. Although these industries may sometimes be inneficient, countries will maintain and promote them so that they are are safe in times of war or disasters in other countries. Other gerneral argumnets (Emma)