Free trade and reasons for protection
| English | 中文 | Pinyin |
|---|---|---|
| free trade/friː treɪd/ | 自由贸易 | zì yóu mào yì |
| infant industry/ˈɪnfənt ˈɪndʌstri/ | 幼稚产业 | yòu zhì chǎn yè |
A decision you can investigate
- A bakery can buy cheaper imported flour, but a domestic mill loses customers.
- One import can benefit input users and consumers while harming a competing producer.
Build the explanation
- Free trade 自由贸易 reduces restrictions on international exchange. It can lower consumer prices, widen choice, reduce input costs and open export markets. Domestic firms facing foreign competition may contract, causing unemployment during adjustment.
- Protection may be justified by concerns about dumping, employment, infant industries, tax revenue, unsafe products, a current-account deficit or retaliation. An infant-industry argument seeks temporary time to develop competitiveness, not permanent shelter without improvement.
Work through the evidence
- Fictional flour costs 12 yuan per kilogram domestically and 8 as an import. Using 100 kilograms gives a bakery a potential input saving of (12−8) × 100 = 400 yuan.
- The mill faces lower demand, while the bakery may expand or reduce prices. A safety concern needs a credible product standard and evidence; banning every competitor is not automatically a targeted safety response.
What is the bakery’s potential flour saving?
The saving per kilogram is 4, multiplied by 100.
Test the limits
- Dumping concerns an unusually low export price relative to an appropriate comparison, not every cheap imported product. Protected firms may become less efficient if competition is removed.
- Retaliation can reduce exporters’ markets and widen conflict. A protection judgement should state its aim, duration, likely winners and losers, and why a targeted adjustment policy might or might not work better.
Which strengthens an infant-industry argument?
Protection needs a route toward competitiveness.
Every lower-priced import is necessarily evidence of dumping.
A low price may reflect efficiency; dumping requires an appropriate comparison and evidence.
Apply and explain your answer
- Why does the 400-yuan bakery saving not measure the whole national effect?
- The mill, workers, consumers and other industries can also gain or lose, and the bakery may not pass on all savings.
What risk can retaliation create?
Countermeasures can harm exporters and escalate barriers.
Use the terms precisely
- free trade: International exchange with reduced trade restrictions.
- infant industry 幼稚产业: A new industry seeking time to develop competitiveness.
Match the terms to their meanings.
Each term describes a specific mechanism in this lesson.
Fictional flour costs 12 yuan per kilogram domestically and 8 as an import. Using 100 kilograms gives a bakery a potential input saving of (12−8) × 100 = 400 yuan. The mill faces lower demand, while the bakery may expand or reduce prices. A safety concern needs a credible product standard and evidence; banning every competitor is not automatically a targeted safety response.
Dumping concerns an unusually low export price relative to an appropriate comparison, not every cheap imported product. Protected firms may become less efficient if competition is removed. Retaliation can reduce exporters’ markets and widen conflict. A protection judgement should state its aim, duration, likely winners and losers, and why a targeted adjustment policy might or might not work better.
Free trade reduces restrictions on international exchange. It can lower consumer prices, widen choice, reduce input costs and open export markets. Domestic firms facing foreign competition may contract, causing unemployment during adjustment.