chapter  7
37 Pages

Industrialization, Protection And Trade Policies

In economic history tariffs as an instrument of protection have played some part in the economic growth of industrially advanced countries though the exact extent of such a role has been debated considerably. Classical economists like Smith, Ricardo and Mill advocated the doctrine of free trade based on the theory of comparative advantage. Such a doctrine is an offshoot of the principles of laissez-faire, although it was soon realized that the principles of laissez-faire may not be the best for a country to follow, as some of the basic assumptions such as perfect competition and optimal income distribution may not hold. Several qualifications of the doctrine of free trade

were made, and indeed Mill suggested the use of tariffs to protect infant industries. Some others (e.g. Bickerdike) have shown the case for tariffs to improve upon a country's terms of trade through trade restriction. This has now been regarded as the optimum tariff argument.