What are the arguments against Protection Method of Economy Policy?

Critics also point out certain dangers of protection. The important arguments against protection are given below:

1. Uneconomic Use of resources:

Protected industries are generally those in which a country has less comparative advance. Thus, protection leads to the development of economically less efficient industries and shifting of natural resources of the country from more productive occupations to less productive occupations.

2. Producers Become Lethargic:

Protection makes the home producers lethargic. In the absence of competition from abroad, the home producers do not bother to reduce the cost of production in their units and make them more efficient.

3. Check on Industrial Growth:

Protection once given to an industry is taken as a matter of right and thus cannot be easily removed. Protection tends to become a permanent feature and the protected industry continues to be considered as an infant industry.

4. No Cure for Unemployment:

Protection may not prove to be a successful method of generating employment. The creation of employment because of the expansion of the protected domestic industries may be offset by the reduction in employment due to the resultant decline in exports.

5. Loss to Consumer:

The ultimate burden of protection falls on consumers. Protection results in restriction on cheap imports and rising of domestic prices. The consumers suffer from these effects.

6. Unequal Distribution of Income:

Protection encourages unequal distribution of income and wealth. Under protection, the rich (producers) become richer because of high profits in the protected industries and the poor (consumers) become poorer because of higher prices.

7. Creation of Monopolies:

Tariff is considered the mother of trusts. In the absence of foreign competi­tion, the domestic producers combine to reap higher profits.

8. Encouragement to Corruption:

Protection may lead to political corruption. The producers of the protected industries, instead of paying their attention to improve the efficiency of these industries, use their money and energies to bribe the legislators for the continuation of protection to their industries.

9. Loss of Revenue:

There may be a loss of revenue to the government due to protection. Imposition of tariffs reduces imports and, as a result, the revenue from custom duties falls.

10. Retaliation:

Imposition of tariffs by one country often leads to the similar retaliation action by other countries. This results in tariff war among the trading countries and spread of international hatred.

11. Other Drawbacks:

Other drawbacks of the system of protection are summarised below:

(i) Protection is inefficient for the world economy because it results in reduction of world output and world consumption levels.

(ii) Protection leads to fall in international trade.

(Hi) Protection leads to the overvaluation of exchange rate.

(iv) Protection alone is not sufficient for economic development.

(v) Indiscriminate protection is always harmful.

(vi) Excessive restriction on import of consumer goods generate inflationary pressures in the country.