Studyledge

International Trade and Protectionism: Question 6

Syllabus 6.2

Multiple choice AS 1 mark

Which of the following is most likely to be used as an argument in favour of protecting a domestic industry, rather than as an argument in favour of free trade?

A. Specialising according to comparative advantage allows total world output to increase.

B. Producing certain essential goods domestically, such as food or defence equipment, reduces a country's vulnerability if international trade were disrupted, for example during a conflict.

C. Free trade allows domestic consumers to access a wider variety of goods produced in other countries.

D. Removing tariffs and quotas allows domestic firms to access larger export markets and benefit from economies of scale.

Choose an answer to check it, then compare with the worked solution below.
Show worked solution Hide worked solution

Worked solution

Step 1: Recall the direction each statement points

An argument for free trade explains why removing barriers to trade is beneficial. An argument for protectionism explains why restricting trade, keeping a barrier in place, is beneficial, usually by pointing to a cost of relying on foreign supply that outweighs the standard gains from trade.

Step 2: Test each option against this distinction

  • Option A describes the classic gain from specialising by comparative advantage: total world output rises. This is a reason to trade freely, not to protect an industry.
  • Option B describes the national security (strategic industry) argument: a country may choose to keep producing essential goods, such as food or defence equipment, at home even if this is not the cheapest option, because relying entirely on imports would leave it dangerously exposed if trade were cut off during a conflict or crisis. This is a reason to restrict trade in these goods, i.e. an argument for protection.
  • Option C describes a standard consumer benefit of free trade (greater variety), not a reason to protect a domestic industry.
  • Option D describes a benefit domestic exporters gain from trade liberalisation (bigger markets, economies of scale), which is again an argument for free trade, not protection.

Step 3: Select the correct option

Only Option B gives a reason to deliberately keep a domestic industry protected from foreign competition, even at the potential cost of efficiency, because of the risks of depending on imports for essential goods.

Final answer

Option B. The national security argument is the one statement here that argues for protecting a domestic industry, rather than for free trade.