The Costs of a Protectionist Cure

In recent years, many ailing US. industries have blamed their ill health on foreign competition and have sought a cure in limiting the flow of imports. While proponents of protectionist legislation argue that trade restrictions are necessary to protect U.S. jobs, economic theory indicates that protectionism may secure jobs at a substantial cost to consumers and economic efficiency. In capitalism, unlike in medicine, isolating the patient can cause the disease to spread. The Japanese Voluntary Export Restraint (VER) program, which restricts exports of Japanese cars to the United States, provides a useful example of such a costly cure.