4.1.4 Protectionism Flashcards
What is protectionism?
Protectionism is the theory or practice of shielding (or protecting) a country’s domestic industries from foreign competition by taxing imports, imposing quotas or passing laws.
What is the reason for protectionism?
Protectionism is a government‘s actions to protect the businesses, industries and interests of their own nation.
What is a tariff?
A tariff is a tax placed on an import to increase its price and decrease its demand.
What are the positives effect of tariffs for a business?
-Protection of new domestic industries from foreign competition.
-Protection of ageing and inefficient industries from foreign competition.
What is a negative effect of a tariff on a business?
-If a business faces having to pay stiff tariffs they may have to reduce production and this can mean job losses.
What are the 3 reasons tariffs are imposed?
1.) To raise tax revenue.
2.) For environmental reasons
3.) Protectionism
What are the advantages of tariffs?
-Domestic produced goods do not incur the tariff and so are likely to be cheaper.
-Tariff protection allows domestic businesses to sell more because they gain a price advantage compared to imports.
-Domestic producers gain price advantage.
-It can ensure better job security.
-It can raise important tax revenue for government which can be spent possibly on infrastructure.
What are the disadvantages of tariffs?
-Some products, even with tariff cost added, do not put off potential customers willing to pay for unique or unusual imported products.
-Tariffs may just increase the costs to consumers.
-Other countries may retaliate by imposing their own tariffs on imports.
What is an import quota?
A quota is a physical limit on the quantity of goods imported or exported, for example only 10,000 units a year
Why are quotas imposed?
-Allows a country to be sure of the amount of good imported from the foreign country.
-When there is a tariff, if the supply curve of the foreign country is unknown, the quantity of the good imported may not be predictable, quotas are predictable because the actual amount is known.
What are the 3 advantages of import quotas?
1.) Protects domestic industries
2.) Safeguards jobs in domestic industries
3.) Benefits the customers, the price of imported goods rise so domestic goods appear cheaper and better value in comparison.
What are the 3 disadvantages of quotas?
1.) When one country uses quotas, its trading partners do the same and the end result is less exporting opportunity for all producers and higher prices for all consumers.
2.) Quotas are also complex for the country using them. They require a lot of paperwork.
3.) It is also difficult to measure the precise degree of protection quotas offer.
What are the advantages of government legalisation?
-It can be a very powerful tool in preventing fake imports into countries.
-It means customers can trust the products that they are buying are genuine.
What are the disadvantages of government legalisation?
-Every import into the UK cannot be checked 2% are fake.
-The profits go to organised crime and can be in any sectors including medicine, machinery and clothing.
What are domestic subsidies?
Money given to local producers to make their goods cheaper on the domestic market
