4.3.1.4 Protectionism

What is protectionism?

when a country takes action to protect its own industries by restricting trade with other countries.

What are some arguments in favour of protectionism?

• Infant industries

• Dumping

• Domestic employment

• Externalities

• Balance of payments

Define infant industries

unlikely 2 be able 2 compete against established MNCs in dev countries → req. protection (in short term)

Define dumping

over-production in dev countries may be released in2 markets of dev nations which undercuts domestic prices n domestic producers may be forced 2 leave market

Define domestic employment

Protection measures help 2 protect domestic jobs if infant industries r allowed to grow.

Define externalities

Some goods such as illegal drugs & weapons may b considered to have significant harmful effects and should be blocked

Define balance of payments

placing restrictions on imports may help 2 reduce a balance of payments deficit on current account

What are some protectionist measures?

• Tariffs

• Import quotas

• Government legislation

• Domestic subsidies

• Embargoes

Define tariffs

taxes placed on imported goods, domestic goods are not taxed

consumers face a higher price however domestic industries r protected

Define import quotas

a physical limit on volume of imports entering a country

Define government legislation

countries might employ measures such as complex legal forms and health and safety inspections (discourage imports by raising costs)D

Define domestic subsidies

governments pay domestic businesses help reduce protection costs and improve competitiveness

Define embargoes

a total ban on imported products

What is the impact of tariffs on domestic producers?

tarriffs help to make domestic products cheaper in comparison to imported products

What is meant by administrative barriers to trade?

barriers that make it harder to trade with a country- logistically (paperwork/ health and safety inspections)

How might subsidies be used as a form of protectionism?

by providing finance for domestic businesses but not foreign businesses which may lower imports

What might be the impact on a domestic meat processor if high tariffs are placed on imports of fresh meat?

less meat may be imported meaning that the costs increase for the domestic meat processor