Edexcel A Level Business - Theme 4.1.4 Protectionism

Protectionism

approach used by government to protect domestic producers

Tariffs

A form of trade barrier - designed to restrict trade

Tariffs / custom duties = tax on imports to make the expensive

Consumers faces higher price because there are extra charges

High revenue for government

Imposition of tariff have limited impact if demand is price inelastic

Demand will be not lower in proportion to higher price as it is proportionately less

Import quotas

Physical limit on quantity of imports allowed in country

Domestic producers face less of a threat - more of market to themselves

Quotas will increase prices as fewer of cheaper imports are available

Embargo = imports are banned on international trade for political trade

Placing physical limits - some demand will be met by domestic producers

Help to protect / increase domestic employment and prevent overpowering market - improve consumer choices

Government legislations

Some avoids use of tariffs but manage to low amount of imports

Do so by insisting imported goods meets strict regulations and specification

Goods that fails to reach cultural / environmental standards face administrative barriers

Rules and regulations - makes it difficult for importers to penetrate oversea markets

Subsidies

Financial support given to domestic producer to help compete with oversea firms

Help lower prices - low production costs and higher supply which forces equilibrium prices down

If subsidies given to exporters - easier for home businesses to break in foreign market