What is the Non-economic Argument Against the Protection Theory of Trade?

Protection is also advocated on certain non-economic grounds.

1. Defenc e:

From the standpoint of national defence each country should be self-sufficient as far as possible. It should avoid too much dependence upon other countries, even if such avoidance involves an economic loss. ‘Defence is better than opulence.’ Therefore, it is essential to make a country militarily strong even though it may not be economically prosperous. No nation can prosper if its defence is weak. And, defence-goods producing industries cannot develop unless they are protected.

If a country is dependent on another country for the supply of certain essential articles and war goods, it becomes politically weaker and in times of war its economy will be strangled if the supply is stopped. Thus, the policy of free trade was abandoned. But then every country in the world went to the extreme of following the policy of economic nationalism because each country wanted to become self-sufficient and less dependent on the other countries.

However, from an economic point of view, protection cannot be advocated on grounds of defence or self-sufficiency. Because, if a country tries to develop those industries where there are no natural advantages then it would mean a very heavy production cost.

These resources would be more productive if they are utilised in some other channels. The total output will be smaller if the resources are utilised where they are less efficient than where they are more efficient. The community will be worst hit if the resources are so diverted where they are less productive.

But in the matter of defence, economic arguments do not hold good because security of a country is more important. Freedom has to be protected at all-costs. Hence, protection should be granted to those industries which are important from the point of view of defence. And only with a protection can a country become competent to produce essential goods and war materials. The Second Fiscal Commission in India, therefore, rightly recommended the granting of protection to industries which are important for the defence of the country.

The defence argument for protection is very strong. But it does not mean that protection should be resorted to for making the country self-sufficient in all respects. Because, no country possesses all the advantages for the production of all the commodities. Moreover, the policy of extreme economic nationalism leads to retaliation by other countries.

When they retaliate by imposing tariffs, the fall in exports to them will lead to economic contraction and a tariff war between countries. As such the level of income and employment will fall with its cumulative effect on the economic system as a whole.

This policy of economic nationalism of any country, therefore, is called “beggar-my-neighbour” policy. A country, cannot prosper by impoverishing other neighbouring countries. It will be suicidal and will go against the country in the future.

As a result of beggar-my-neighbour policy adopted by countries and consequent retaliation, all will be worse off than before they began. International trade will be choked in an entanglement of tariffs and all the benefits of international division of labour will be lost to the world.

Once the beggar-my-neighbour policies breed their ill effects, they will remain and cannot be quickly undone. Attempts were therefore, made to bring them into international trade organisation and agreements were entered into for keeping the international trade free from any restrictions. However, it has yet to be freed from a number of restrictions.

2. Patriotism:

Protection is essential to arouse and satisfy patriotism of the people. It is the duty of every citizen to prefer homemade (Swadeshi) goods to foreign goods. As such homemade goods should be available in the right quantity and quality. This is not possible without such home industries being developed with the aid of protection.

3. Preservation:

Protection has been advocated in some countries for the purpose of preserving certain classes of population or certain occupations. This argument was particularly applied to agricultural duties, to the preservation of an agricultural community or farming industry of the country for political and social reasons.

The agricultural community was always considered to be an important part of the society whose interests were affected by the import of cheap foodgrains from outside. Protection was advocated to maintain the price of agriculture at a high level.

Tariff duties should preserve peasant class in large numbers and in prosperity as it is the backbone of the society. European countries also faced the situation of falling prices because of import of cheap foodgrains from Australia, Canada, etc., and when agriculturists’ interests began to suffer, these countries imposed a tariff duty on import of foodgrains. In England, for instance ‘Corn Laws’ imposed tariffs (in 1819) on wheat to maintain the price levels during the Napoleonic Wars, and to prevent the collapse of grain production and save the peasantry. It was after a period of some 27 years, in 1846, that the Corn Laws were abolished and England’s trade was made free.

Similarly, when in other European countries also prices tended to fall because of import of cheap foodgrains from Australia, Canada, etc., agriculturists’ interests began to suffer, hence, these countries too resorted to tariff duty on the import of foodgrains.