Industries, especially agriculture, must be maintained at a high level in case foreign sources are

Cut off during a war. Key industries which have a significant defence role should be protected to

Avoid reliance on a foreign supplier. In conditions of excess capacity, protection increases employment

By switching demand away from foreign to domestic production, and, through an increase in

The surplus on the balance of payments, enables aggregate income to be raised through the multiplier

Effect. Protection also enables new industries to develop to an optimum size — the infantindustry

Argument. Protection can be used as a counter to dumping (contingent protection) and as

a retaliatory measure against other countries’ restrictions.

The case for protection for the developing countries was put forward by R. D. Prebisch (1901 —

The developing countries had experienced a long-run decline in their terms of trade. Their

Demand for imported manufactures grew much more rapidly as their real incomes rose than did

the advanced countries’ demand for their exports, with a consequent pressure on their balance of

Payments. Protection would improve their terms of trade by causing a reduction in the price of

Their imported manufactures arising from their reduced demand, and it could also be used as a

Means for allocating the limited supply of foreign exchange. Protection has also been proposed as