4.1.4 Protectionism

Question 1

Protectionism

Answer 1

When a government protects domestic businesses and jobs from foreign competition

Question 2

Reasons why governments use trade barriers - 4

Answer 2

• to protect jobs
• to protect infant industries against larger foreign competitors
• Raise tax revenue - governments can raise revenue if it imposes tariffs on imports - this money can be spent on government services e.g improve heatlhcare / education
• To prevent entry of undesirbale/ harmful good

Question 3

4 ways of protectionism

Answer 3

• impose tariffs
• Import quotas
  -Government Legislation
• Domestic subsidies

Question 4

Tariffs

Answer 4

A tax that has to be paid on imported goods into a country

Question 5

What do tariffs do

Answer 5

they make imported goods more expensive than domestic ones, (Which may be then passed on to consumers)

therefore reduces demand for imported goods and increases demand for domestic goods

Question 6

Tariffs can also raise revenue for who?

What can they do because of it

Answer 6

Tariffs can raise money for the government

and they can put this money back into public services e.g healthcare & education

Question 7

3 disadvantages of tariffs

Answer 7

imposition of tariffs may be limited if demand for imported goods is price inelastic - consumers may still buy the product even if it is expensive

• tariffs can restrict consumer choice.
• the lack of competition also removes the incentive for domestic businesses to improve efficiency and quality

Question 8

Import Quotas

Answer 8

limits on the number of goods that can be imported into a country

Question 9

how will placing limits on imports help domestic businesses and their economy

Answer 9

placing physical limits on the flow of imports means that some demand for those goods will be met by the domestic producers.

This will help to protect/ increase domestic employment & business

Question 10

What is a major problem with Trade barriers such as tariffs & quotas

Answer 10

some countries may retaliate starting a trade war

Question 11

Trade war

examples

Answer 11

A strategic rebellion one nation rages against another. It involves raising tariffs, quotas and other duties on imports

chicken wars
in early 1960s , France & Germany imposed high tariffs on American chickens as demand for European chickens fell with people preferring cheaper American chickens
- the US retaliated with imposing higher tariffs on lots of commodities e.g French Volkswagen

Question 12

Government Legislation

Answer 12

To reduce the amount of imports, some governments may insist that imports are met with strict regulations

e.g safety regulations, quality regulations

Question 13

Domestic subsidies

Answer 13

Sums of money provided by the government to domestic firms to help keep prices of good low

Question 14

Subsidies reduce the costs of what

what does it allow.

Answer 14

Reduces the cost of production, allowing domestic products to have lower prices than imports. (As a result decreased demand for imports)