Open Trade & Protectionism

What is Protectionism?

It involves any attempt by a country to impose restrictions on trade in goods and services

What is the aim of protectionism?

The main aim of protectionism is to cushion domestic industries from overseas competition and prevent the outcome resulting solely from open trade

What are the different types of protection?

• Tariffs

• Quotas

• Non-Tariff Barriers

• Export Subsidies

• Domestic Subsidies

What are tariffs?

A tariff is a tax or duty that raises the price of imported products and causes a fall in domestic demand and an expansion in domestic supply

What is an example of a tariff?

The USA has an 11% import tariff on imports of bicycles from the UK

What are quotas?

They are limits on the quantity of importers allowed or limited to the value of imports permitted into a country in a given time period

What is an example of a quota?

Algeria limits car imports to 400,000 cars per year

What are non-tariffs?

Other regulations (e.g., labelling requirements and quality standards) can be just as important as tariffs as a barrier to trade. Non-tariff barriers (NTBs) are administrative, technical and regulatory obstacles to trade

What are export subsides?

• They are payments to encourage domestic production by lowering their costs.

• Well-known subsidies include the Common Agricultural Policy in the EU and cotton subsidies for US farmers

What are domestic subsides

They involve government help ‘State Aid’ for domestic businesses facing financial problems e.g. subsidies for car manufacturers