Quick questions on Free trade and protection - TCE Economics (Tasmania)

Protection is any government policy that gives domestic producers an advantage over foreign competitors. The main methods are:

A tariff is the classic protection diagram. Without trade, the domestic price sits where domestic demand meets domestic supply. With free trade at a lower world price, consumers buy more and imports fill the gap. Imposing a tariff lifts the domestic price toward the world-price-plus-tariff level.

Several arguments are made for protection. The infant industry argument says new industries need temporary shelter until they grow large enough to compete. Protection is also defended to save jobs in import-competing industries, to maintain national security in essential industries, to prevent dumping (foreign goods sold below cost), and to diversify the economy. These arguments have political appeal, especially where job losses are concentrated.

The economic case for free trade rests on comparative advantage: when countries specialise where their opportunity cost is lowest and trade for the rest, world output rises and consumers enjoy lower prices and wider choice. Free trade also exposes domestic firms to competition, forcing them to lift productivity, and gives them access to larger markets and economies of scale. Against protection, economists point out that it raises prices, props up inefficient firms, invites retaliation that can trigger trade wars, and imposes the deadweight loss shown above.