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January/February 1988, 
Vol. 70, No. 1
Posted 1988-01-01

Protectionist Trade Policies: A Survey of Theory, Evidence and Rationale

by Cletus C. Coughlin, K. Alec Chrystal, and Geoffrey E. Wood

Cletus C. Coughlin, K. Alec Chrystal, and Geoffrey E. Wood survey the theory evidence and rationale concerning protectionist trade policies. The authors illustrate the gains from free trade using the concept of comparative advantage and review recent developments concerning the consequences of international trade in imperfectly competitive markets. They argue that, while protectionist trade policies occasionally may offset foreign monopoly power or advantageously use domestic monopoly power, trade restrictions generally reduce both the competition faced by domestic producers and the consumption possibilities of domestic consumers. The empirical evidence is clear-cut. The costs of protectionist trade policies borne by consumers far exceed the gains of domestic producers and government. Moreover, the adverse consumer effects are not short-lived. Protectionist trade policies generate lower economic growth rates than free trade policies. Consequently, national interests will be served by the reduction of trade barriers.