CFA Level I · CFA Level I Exam · International Trade
A country protects its domestic farm sector by arguing it must maintain food production capacity in case of war or a trade embargo. This rationale for protection is best described as the:
This is the national security argument. Governments claim some industries, such as food or defense supplies, must be kept domestically viable so the country is not dependent on foreign sources during war or embargoes, even if protection raises costs.
- Anational security argumentCorrect
- Banti-dumping argument
- Cinfant industry argument
Explanation
Protecting industries considered vital for defense or supply in a crisis is the national security argument. The infant industry argument concerns growth of new industries; anti-dumping concerns below-cost foreign pricing.
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