The recently-retired former Reds centre-back believes that top-flight English clubs should not be able to purchase foreign youngsters from youth academies abroad
Carragher, who retired from football at the end of last season, feels the practice of bringing young players from overseas into clubs' youth systems is damaging for English football.
The former England defender, who played 38 times for his country, believes the national team is struggling because young talent is not able to break into Premier League first teams.
"Academies should be for our kids and if you buy foreign players they should be for the first team," Carragher told The Independent.
"I don’t think it should be made easy for players to get into your first team. The foreign players have been brilliant for this country. But it’s at the stage now where reserve and youth teams are full of foreign players – and what chance do young players have if they can’t get into the youth or reserve team?
"Let’s give them that chance to show a manager what they can do and then ask, are they ready?"
According to the Premier League, 95 per cent of players aged between 16 and 18 at academies are British.
Carragher, though, is of the opinion that lower costs for foreign players are appealing to clubs.
"You can buy a young foreign player for £250,000 but you’ll buy 10 of them and think one of them will probably do well," he continued.
"As things are, clubs take these players and say, ‘if it doesn’t work out at the end of the day it only cost us £250,000’. If I was in a youth team and Liverpool bought the French Under-18 captain in my position, that would deflate me."
Carragher himself spent a number of years in Liverpool's famed youth set-up before going on to make 737 appearances for the club.