1. Protection
Definition:
This is where domestic industries
are given an artificial advantage
over other foreign industries due
to government intervention

2. In Class discussion
 Who buys Australian Made goods as a
choice?
 Who buys goods based on cheaper price?
 Would you buy the cheaper good if it was
made overseas?
 Should the government step in to stop
cheaper imports taking Australian Jobs?

3. Why protection doesn’t work
 Based on the argument of efficiency
– If an industry is given protection then over time it
can become internationally uncompetitive.
– This is because the government is sheltering it
from competing with cheaper foreign industries
– In the short run protection helps to keep jobs but
in the long run this doesn’t work as free trade
(comparative advantage) has proven to generate
more jobs due to higher consumer demand

4. FOR EXAMPLE
 If the steel industry in Australia was protected
then this would in the short term protect jobs.
 However, over time every product that uses
steel like cars would become more
expensive.
 This would make those industries less
competitive by world standards and in the
long run hurt the economy and push up
unemployment in the car industry

5. Methods of protection
 It is important to note that protection only started to
be reduced in the 1980’s.
– Methods used included:
 Tariffs – a tax on imported goods and services
– Makes domestic goods cheaper than imported ones
 Subsidy – a payment to domestic industries to help reduce the
price of goods and thus compete with international goods
– This helps industries but makes them very inefficient
 Quota – physical limit on the number of imports
– Allows domestic industries to compete with foreign ones
– In the 1980’s only 20% of cars bought could be made overseas

6. The move to free trade
 Over the past 20 years there has been a strong
move towards free trade
 Protection has almost disappeared
 As Australia now is a free trading economy (as cited
academically) only those efficient industries now
survive in a fiercely competitive world
 Free trade is working some say as unemployment
has fallen to record lows and consumers now have a
high quality of choice.

7. Individual Questions
1. Explain the reasons why protection was a valid
argument?
2. Explain the reasons why protection has been
broken down and has moved towards free trade
based on comparative advantage.
3. List and explain types of protection
4. What impact would protection have on the
economy? Consider the following :
– Unemployment
– Inflation
– Living standards