Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

Check Your Progress: 
1. 
Define Free trade. 
2. 
What are the advantages of Free trade? 

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13.4 PROTECTION TRADE POLICY 
 
Restrictive Trade Policy was advocated, first of all, by the 
Mercantilists. Mercantilists expounded that restriction is the only 
answer to the adverse balance of payments. Their policy of 
restriction was only for the imports and exports. This theory did not 
say much about the protection of the home industries. 
The meaning of the term 'protection' refers to a set of 
policies framed to encourage the home, industries, it is the 
protection of the home on industries so that they may prosper 
rapidly, protectionism involves following steps: 
(i) Concessional rates for the home-industries in the case of levies, 
duties, etc. 
(ii) Higher rate on levies and duties for the foreign producers. 
(iii) Availability of necessary resources to the home industries. 
(iv) Reservation of national resources for the home industries. 
(v) Discouraging the consumption of the products of the foreign 
producers. 
(vi) Creation of credit marketing facilities and award of tax 
concessions to the home industries.
Thus in simple terms protection means 'step-motherly 
behaviour' with the foreign producers. Pelgrave defines Protection 
as, "The need for maintaining economic independence the danger 
of invasion of foreign goods and tribute paid to foreign producers 
from whom goods are purchased such are well known protectionist 
place which show by their form that they have originated in a time 
of international conflict. "It is in the interest of every citizen of the 
state to allot favour to home made goods and home industries. To 
the local citizens he promotion of national industries and economic 
interest seem a duty nearly as imperative as the defence of the 
national territory against invasion. 
The protectionism is more affected by the political ideal than 
the economic interest. Protectionism helps in building the national 
industries which avoid any kind of foreign interference. A country 
which is economically dependent on foreign products cannot be an 

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independent country in its political life. Diplomacy, at international 
level is bound to affect the national integrity, protectionism helps in 
diversifying the resources, building of key industries and providing 
the national colour to the economy. To quote Pelgrave again, "The 
advantages of diversified industry of husbanding national 
resources, or of maintaining certain industries that would disappear 
under free trade are not believed to mainly economic.