Does the “typical argument for protectionism” you cite claim that protectionist policy increases the total amount of local production (creating a steady-state trade surplus)? Or does it merely shift local production from comparatively-advantaged-to-produce-locally goods to comparatively-advantaged-to-import ones (hopefully ones with greater externalities to local production)?
There’s a relevance to the anti-aid argument: The first-order effect of steady-state aid is to create the effect of a steady-state trade deficit on production without an effect on the current account. If the total externalities to local production are larger than the consumer value of goods, then this effects a welfare transfer from the aid recipient to the aid sender.
But the general-equilibrium effect is a shift of the recipient’s local production away from the received goods towards the marginally-efficient goods. If the marginally-efficient goods have sufficiently greater externalities to local production than the received goods, then this might be a net win. (Where “sufficiently” here depends on elasticities of production and consumption.)
Does the “typical argument for protectionism” you cite claim that protectionist policy increases the total amount of local production (creating a steady-state trade surplus)? Or does it merely shift local production from comparatively-advantaged-to-produce-locally goods to comparatively-advantaged-to-import ones (hopefully ones with greater externalities to local production)?
There’s a relevance to the anti-aid argument: The first-order effect of steady-state aid is to create the effect of a steady-state trade deficit on production without an effect on the current account. If the total externalities to local production are larger than the consumer value of goods, then this effects a welfare transfer from the aid recipient to the aid sender.
But the general-equilibrium effect is a shift of the recipient’s local production away from the received goods towards the marginally-efficient goods. If the marginally-efficient goods have sufficiently greater externalities to local production than the received goods, then this might be a net win. (Where “sufficiently” here depends on elasticities of production and consumption.)