Diversification argument may be criticised on the following grounds

List and other economists advocated protection with the purpose of diversifying the industries of a country. The basic idea behind this argument is that a country should have a variety of sources of production and employment and excessive specialisation (or over dependence on one industry) is dangerous both politically as well as economically.

Politically, excessive specialisation leads to too much dependence on foreign trade which is risky and undesirable during war time.

Economically, dependence on a few industries may result in serious economic dislocation in times when such industries pass through adverse circumstances.

Thus, in order to have (a) national self-sufficiency and (b) smooth and balanced growth of the economy, it is necessary to bring about a diversification of’ industries through protection.

Diversification argument may be criticised on the following grounds:

(i) It is not possible for a country to attain complete self- sufficiency. Even the most advanced countries, like U.S.A., U.S.S.R., do not possess all types of resources necessary for self-sufficiency.

(ii) This argument cuts the very root of the principle of comparative advantage as the basis of international trade.

(iii) This argument may lead to abandonment of international economic relations.

(iv) Complete isolation is neither desirable nor possible in the present-day world.