See why such groups may seek to preserve or improve their economic positions by persuading the

government to impose tariffs or quotas to protect them from the “detrimental” effects of free trade.

The thing of primary concern is that the costs of protectionism are hidden because tariffs and

Quotas are embedded in the prices of goods. Thus policy makers face fewer political restraints in

Responding positively to demands for protectionism.

This tariff and quotas revenue is essentially a transfer of income from consumers to government

and does not represent any net change in the nation’s economic well-being. The result is that

Government gains a portion of what consumers lose.

In short, tariffs directly promote the expansion of relatively inefficient industries which do not have a

Comparative advantage and indirectly cause the contraction of relatively efficient industries which do have a

comparative advantage. This means that tariffs cause resources to be shifted in the wrong direction. This

Is not surprising. We know that specialization and unfettered world trade based on comparative advantage

would lead to the efficient use of world resources and an expansion of the world’s real output.

The purpose and effect of protective tariffs are to reduce world trade. Therefore, aside from