4.1.4 Protectionism

Question 1

Protectionism

Answer 1

Involves any attempt by a country to impose restrictions on trade in goods and services.

Protects domestic businesses from overseas competition.

Question 2

Three main kinds of protectionism

Answer 2

1) Import quotas = A maximum level of imports permitted into a country.

2) Tariffs = Add tax on foreign products.

3) Domestic and export subsidies = Financial support given to domestic producers.

Question 3

Reasons for protectionism

Answer 3

1) New/fledging industry.
2) Protection of jobs in home industries.
3) Protection of strategic industries.
4) Reduces dumping - when firms sell products abroad at below cost value.

Question 4

Strengths and Weaknesses of Tariffs

Answer 4

+ Domestic businesses can price competitively.
+ Job security.
+ Source of tax revenue.
+ Protects domestic/infant businesses from overseas competition.
+ Aid growth/GDP

• Unfair competition.
• Often reciprocated so restricts trade.
• Increases prices for consumers.
• May not put consumers off.

Question 5

Strengths and weaknesses of quota’s

Answer 5

+ Protects domestic businesses.
+ Job security.
+ Boosts local investment.

• Unfair competition.
• Often reciprocated so restricts trade.
• Often lasts long after infancy.
• Restricts choice for customers.
• Complex

Question 6

Strengths and weaknesses of subsidies

Answer 6

+ Increased supply and consumption of domestic products.
+ Slow downs process of industry decline.

• Funded from taxation or borrowing.
• Businesses may become dependent on help.
• Unfair competition.
• Limited impact to correct market failure.