trade and protectionism

proctectionism

protecting domestic firms from foreign competition

quotas

a limit on total imports of a good

e.g. Brazil imposing import quotas on ethanol from USA

non tariff barriers

using differences in regulation to protect domestic industries

e.g. Japan only has a specific kind of ski because ‘special’ snow

tariffs

a tax on imports

embargo

outright ban on imports

export subsidies

when the gov pays for part of the production but specifically for exports

e.g the EU has accused China of subsidising its electric vehicles

logic chain for quotas

a country sets a total limit on imports of a good - domestic consumers are forced to use domestic products - this reduces the total amount of imports which improves the current account - improves employment in those industries

logic chain for export subsidies

the gov pays for part of the costs for exporting firms - this reduces export prices - making the country more internationally competitive - this increase X and domestic output

arguments for protectionism

1. protecting “infant industries” so that they can access economies to scale

2. protecting domestic employment (preventing structural unemployment)

3. raising revenue for government

4. protecting against unfair trade practices (e.g. dumping)

5. national security (in case of a war)

6. reducing trade deficits