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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
