Trade Protection's Risk of Retaliation

Steps:

• Identify the question: Focus on disadvantages of protecting manufactured goods from imports.
• Recall trade protection methods: Tariffs, quotas, or subsidies shield domestic industries but distort global trade.
• Evaluate options: Seek the negative outcome, not benefits like industry growth or domestic demand.
• Select A: Retaliation is a classic downside, as it escalates into trade conflicts.

Why A is correct:

• Economic theory of protectionism shows it violates free trade principles, prompting reciprocal barriers from partners under WTO rules or bilateral agreements.

Why the others are wrong:

• B: This is an advantage, as infant industry argument justifies temporary protection for emerging sectors.
• C: This is a benefit, boosting local production and jobs in protected industries.
• D: This is a positive effect, conserving foreign exchange by limiting import payments.

Final answer: A