Open Trade & Protectionism

What is Protectionism?

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

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

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

  • For example, 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

  • For example, Algeria limits car imports to 400,000 cars per year.

What are Non-Tariff Barriers?

• 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 Subsidies?

• 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 Subsidies?

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

What is Open Trade?

• It is an agreement between countries to trade with each other without erecting barriers to trade.

What is the aim of Open Trade?

• To create economic growth, innovation, and competition, while also making goods and services more affordable for consumers

Examples of Open Trade:

• Economic growth

• Innovation

• Competition

• Affordability

• Global participation

• Collaboration

What is Economic Growth?

• Open trade can help countries grow faster and become more competitive

What is Innovation?

• Open trade can motivate innovation and encourage producers to adapt to new products and markets

What is Competition?

• Open trade can sharpen competition and lead to success

What is Affordability?

• Open trade can make goods and services more affordable for lower-income households

What is Global Participation?

• Open trade allows countries to participate in the global economy and take advantage of foreign direct investment (FDI)

What is Collaboration?

• Open trade can facilitate collaboration on global challenges like energy, sustainability, human health, and poverty