International trade (protection)- Australia

auspices:

*Free trade enables greater competitor, higher quality goods, stinting growth and lower prices.

*Free trade increases real incomes as prices are lower and consumers buying power will be increased.

Through specialization countries go off produce tabooside their PPF

Arguments for protective covering:

*Protection benefits small developing industries whereas free trade benefits the general public

*Governments squeeze out us protection to gain political advantage-they buy votes from the industries they protect

*Cost of protection for the PMV and TCF industries amount to over 2 billion a form; this is 2 billion that consumers do not have to leave out on other goods and services

The infant industries line of credit:

New developing industries anticipate protection in early years until they mature and can take advantage of economies of scale. These industries should then naturally become internationally competitive and develop a comparative advantage. This is often not the case as the industries become accustomed to the lack of competition and the protection becomes desire term rather than short term.



baby industries protection can be justified as long as the level of protection is reduced over time

The diversification argument:

If comparative advantage was fully adopted and countries change in only a few industries (placing all industries in these sectors) then changes in the worlds demand and price would have a huge effect on the economy. So it is better to transmute industries and thus resources, so as to not place all of ones ball in the same basket. In this case protection is infallible to start up the industry and as the industry becomes more competitive the level of protection can be decreased.

Anti-dumping argument:

Dumping is when an overseas firm sells products in a country infra its cost of production in an effort to drive out the domestic producer. These firms may be large enough to...

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