Question

Who does protectionism protect? From what does it protect them?

Short answer

Domestic manufacturers and producers from the foreign competition.

Step-by-step solution

Step1. Introduction

With the increased globalization, protectionist policies are necessary. Protectionism essentially means the reduction in the volume of foreign trade and putting a cap and check on it.

Globalization refers to the spread of and easy access to/of products, services, labor, capital, etc across the borders of the globe.

Step2. Explanation

Globalization leads to increased integration with the rest of the world. This calls for protectionist quotas and tariff policies to ensure the survival of domestic players- the manufacturers and producers till the time they are competition ready.

Step3. Implications

Protectionism and protectionist policies are necessary because of the reasons as listed under:

1. Protect the country's BoP (Balance of Payments) from deteriorating. If the imports continue to rise to a level such that the country looses a chunk of its forex reserves, it becomes essential to take up protectionist policies and reduce imports.

2. With increased globalization, many MNCs setup their units in the economy. Laws that legally protect the employees and workers working there in terms of their working environment, health conditions, wages and allowance benefits, etc become necessary.

3. Many domestic industries which are yet developing need to be protected from the cheap imports as otherwise they would be forced out of business and won't be able to develop and flourish.

4. Low demand and recessionary conditions in the domestic economy can further be harmful for the domestic players if the imports continue to surge and already low demand is catered by the imports. Hence, protectionism is important.