4.1.4 Protectionism

Question 1

protectionism involves?

Answer 1

impose restrictions on trade in good and services

Question 2

reasons for/aims of protectionism

Answer 2

• cushion domestic businesses and industries from overseas competition
  1. new feeding industry (require temp government protection from overseas comp, setting import tariffs = allow to develop)
  2. jobs in home industry & balance of payments on current account
  3. protect of strategic industries (protect employment, involve value judgments in determining what is a strategic sector)
  4. dumping

Question 3

3 main types of protectionism

Answer 3

1. import quotas
2. tariffs
3. domestic and export subsidies

Question 4

subsidy/ impact on the businesses

Answer 4

payment = encourage domestic production lowering costs
-form of gov support = provided consumers/producers

• money = local producer =cheaper in domestic market
• raises price of foreign goods vs domestic goods = reducing demand

Question 5

adv and dis of subsidy

Answer 5

adv:
- helps in economic crisis
- protects jobs in industries hit by recession
- increased supply and consumption of domestic product
- - boost demand for industries e.g. post recession

dis:
- dependant on it
- env risk of excess producing
- funding from taxation/borrowing = risk
- limited impact to correct market failure
- unfair competition and encourage inefficiency

Question 6

tariff/ impact on business

Answer 6

• duty raises the price of imported products

= reduction in domestic demand & expansion in domestic supply

• raise tax revenue for local business and increase domestic production (foreign producers cut product = impact employment) = less foreign competition
• protect domestic/infant industries from foreign competition (MNCs) = increase import prices
• protect ageing/inefficient industries

Question 7

advs and dis of tariffs

Answer 7

adv:
- opening point for negotiation
- set policy = receive money, product revenue on goods and services brought into country
- domestic goods= competitive price
- job security
- aid growth and GDP and source of tax revenue

dis:
- antagonise existing issues between governments
- = decrease in production quality
- many not put off consumer = increase consumer prices
- unfair competition
- restricts trade
- may incur retaliation

Question 8

quotas / impact on businesses

Answer 8

• volume limits on level of imports allowed or a limit to value of imports permitted into a country in a given time period
• used in negotiating trade
• reduce imports and increase domestic products, protect domestic producers= can be certain in volume of import = protect domestic jobs and certain industries
• prevents international trade
• domestic producers know up to a limit the foreign competition they will have

Question 9

adv and dis of quotas

Answer 9

adv: 
less foreign competition 
boost local investment 
protect domestic business 
create jobs for local country 

dis:
less exporting opportunities for producers, high consumer prices, complex
-quotas often last longer than intended = restrict company after infancy
-face limited trade opportunities= often reciprocated

Question 10

import licensing

Answer 10

governments grant importers the right to import goods these can be restricted

Question 11

intellectual property laws

Answer 11

patents and copyright protection protecting domestic ideas and products

Question 12

technical barriers to trade

Answer 12

product labelling rules and stringent sanitary standards

Question 13

embargo

Answer 13

official ban on trade or other commercial activity with a particular country

Question 14

dumping

Answer 14

firms sell product abroad in export markets at below costs or significantly below prices in home market

(form of predatory pricing)