Why do countries protect trade?

Despite free trade having many benefits (as discussed in my previous post), many countries choose to participate in protectionism, the protection of domestic industries from foreign competition. But as free trade and specialisation argues that the global economy will benefit in terms of increased production, efficiency and welfare, why do countries want to protect their trade?

The most basic answer to this question is that there is no guarantee that these benefits will be equally distributed among the trading countries. Individual countries may feel that it is in their best interest to restrict the freedom of trade. Countries and organisations in favour of free trade may see this as myopia (short shortsightedness). However, a number of arguments for protecting trade exists. 

Reasons for protecting trade:

• To protect infant industries. Infant industries cannot afford to complete with some importing industries that are benefiting from economies of scale, so tarrifs are used to protect these indutries.
• To protect sunset industries. These are industries that are in decline due to a structural change of the economy. Protection of trade is therefore used to prevent unemployment in the short term. 
• To avoid the dangers of over specialisation. Governments may choose to limit over specialisation if it risks leading to the country becoming over dependent on the export sales of a single or few products. An example in Ethiopia, where an over dependence on coffee (which experiences volatile prices) means protection is required to be able to diversify industries. 
• To cushion home employment. Protection may prevent the loss of domestic markets to the free market forces of demand and supply on a global level if they would not be able to compete. 
• To prevent dumping. Dumping occurs when manufacturers export a product to another country at a price either below the price charged in its home market of below its cost of production as a predatory move to gain entry to the market of that country. 
• To avoid unfair competition. Countries that subsidise their exports to make price more competition may be considered to be unfair competition. In retaliation, importing countries put a tariff on the goods to restore fair competition. 
• To raise revenue. A tariff is a tax on imports and the revenue will go to the importing country and can be spent in other sectors of the economy.