Protectionism and Free trade

Free trade

Countries can import and export without tariff barriers

Advantages of free trade

• Greater competition between firms

• Variety of choice on peoples Standard of Living

• Firms have access to larger markets

Disadvantages of free trade

• Infant/sunset industries collapse

• Unemployment could increase

• Difficult to prevent dumping

Protectionism

Protect domestic firms from foreign competition and control imports

Import tariffs

Duties or taxes on imported goods by government

Import quotas

Government limits number of goods and services that can be imported

Subsidies

Subsidise local industries to compete with imported goods by reducing cost of production

Reasons for protectionism

1. Protection of specific industries

2. Employment

3. Prevention of dumping

4. Encourage economic growth

African Continental Free Trade Agreement

Aims to become world’s biggest free trade

Southern African Development Community

• Removed tariffs on most products

Southern African Customs Union

• No Trade barriers

• Same tarrifs towards non-member states

African Growth and Opportunity Act

• Preferential access to US market through lower tariffs