But when the product is soda (bad for you), it's probably better to have less efficient/productive suppliers - you want worse and more expensive companies to be providing it.
Some odd wording. The theories would say that the TOTAL pie would be smaller. It makes no distributive claim.
What protectionism does, from a theoretical standpoint, is provide some control over the distribution of the surplass.
Having said all of that, it should be remembered that we do not live in a spherical void. In practice, it is entirely possible for "free" trade to leave a country worse off then they would have been with no trade.
This got me thinking how odd it is that economic theory only gets invoked in so far as it advocates free trade: https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...
I reasoned thusly:
1. Country A can produce good X at price p_a < price p_b the price at which domestic X is available in B.
2. No deadweight trade loss, so X is available at p_a in B
3. Thus for the same quantity n of X, B has a surplus of n(p_b - p_a).
4. But domestic producers of X have lost income, and if there isn’t something else for them to do, the total shrinkage in B’s economy may exceed the surplus (I haven’t worked out this term but it should be pretty easy), thus leaving B worse off.
Factor in deadweight losses and free trade definitely could leave B worse off, by forcing some of its economy to be unproductive.
People participating on the international trade are better off. There are plenty of cases of market failures (monopolies, etc), inertial problems (deflation, etc), or human capital destruction (due to worsened wealth distribution) predicted by theory already. Any of those can overwhelm the usual net positive contributions of trade.
Protectionism provides a mechanism to increase comparative advantage.
American economists drank a little too much of their own ricardian kool aid in the 90s and early 00s when they paternalistically tutted at China for enacting protectionist policies against her own good.
Now that China has stolen comparative advantage in electronics manufacturing, the CFO of Huawei is under house arrest and the tutting has all but dried up.
This theory is really lacking when it comes to modeling the effects of real world protectionism.
Imagine a country A, with all the natural resources, a country B, with a well developed pharma industry, and a country C, hosting an industrial sector.
Without protectionism, the pie might be large, but most of it is allocated to country B and C. Country A ends up with depleted natural resources, no factories, and a trade deficit which denies them access to drugs and industrial goods.
With protectionism, country A can manage their trade deficit, which allows them to bootstrap the industry it direly needs as soon as all their natural resources have been mined and exported.
This is not, it turns out, a particularly effective algorithm, which is why things like genetic algorithms, simulated annealing, etc., have mechanisms to protect and allow "non-best" candidates to survive.
Similarly protectionism can generate better outcomes over the long term.
It's not that the locals really want the shirts with the logos of our Super Bowl losers and the outfits even Goodwill couldn't unload domestically, but it's what they've been forced to settle for.
It gets dumped on their market so cheaply no local manufacturer can compete, even if they can offer choices better for local styles or needs. Clothing manufacture is fairly low tech and not really location sensitive, so it's something that most countries can do to start moving up the economic ladder beyond raw extraction.
Give them a protected window of a few years without cheap imports, and you can ramp up supply and distribution networks (so you can compete more effectively on price) and also potentially improve local standards of living enough that the workers can afford to buy the goods they're producing.
And when those theories are discussed by serious minded people they are frequently forced to qualify the discussion with "except for those left behind," mostly because of the unavoidably obvious destruction all around them.
"Those left behind" being a euphemism for the working class of otherwise extremely wealthy countries.
When you've heard enough of this for enough decades it eventually dawns on you that it's just about cheap, exploitable labor. The rest is the professional class b.s. spin used to rationalize it.
Very few policies and political theories are correct for all times and all cases.
What history shows us is that protectionism is a necessity for less developed countries to develop and catch up to more developed countries.
The US, Germany, Japan, Korea, Taiwan, China, etc all used protectionism to help local industries and companies develop.
The US became the largest economy in the world due to protectionism. Germany, Japan, Korea, Taiwan, China, etc all copied our template to become successful economic powers.
What the established economists are paid to peddle in countries that have already taken advantage of centuries of protectionism to build their economies and industries and now want everybody else (regardless of the stage they are in) to open to their wares.
Then again normal economic theory is peddled by people whose careers are tied to the establishment. They can't afford to speak in favor of protectionism if they still want their careers and grants and policy advisor positions.
If A protects, and B and C are open, A can get way further ahead by strategic investments, dumping, etc..
'Free Trade' only work if A, B and C work.
If A doesn't open their markets, then B and C should close theirs to A as well.
This 'strategy game' type dilemma is why 'Free Trade' negotiations actually exist in the first place.
If 'open markets' benefitted both parties irrespective of what the other party was doing, then most nations would simply 'open the kimono' as wide as possible to everyone, essentially reaping the benefit, waiting for the 'full benefit' to be yielded when the other parties eventually open up. Negotiations wouldn't really be needed.
But it doesn't work that way.
During the establishment of free trade, there's considerable negotiation around tit-for-tats on protected industries like telecoms, agriculture etc.. Also, there's a lot of rules in such agreements about how governments are allowed to subsidize specific industries.
If the Canadian gov. is giving massive loans to the lumber industry below market rates, enabling Canadian lumber makers to sell very cheaply and therefore wipe out their American counterparts, and then of course acquire them for pennies on the dollar ... well, this would be considered a 'subsidy' and you can see the problem aka 'strategic dumping'. (FYI this is almost a kind of problem right now - Canada leases 'Crown Land' (i.e. government land) on the cheap to forestry corps. and US believes that's a subsidy)
Hence 'Free Trade' only works if the parties play by an agreed upon set of rules.
Without such agreements, and assurances that counterparties are playing by a set of rules, then a degree of protectionism is warranted.
If one side cheats, they can win in a much bigger way.
All of that even when parties are ballpark in the same sized economies, at similar levels of development, i.e. France-Germany.
But with US-Venezuela for example, it's another ballgame as unprotected access to undeveloped markets can possibly lead to a total takeover of the economy, rendering one state a commercial vassal of the other.
In reality there are no perfect, textbook scenarios for fully bilateral and open trade agreements which is why there are always special cases and things to be negotiated.
Canada's banks and telecoms for example, are not up for sale in NAFTA/USMCA.