4.1.4 protectionism

Question 1

what is protectionism

Answer 1

Protectionism is when a country takes action to protect its own industries by restricting trade with other countries

Through countries having a comparative advantage and empirical data it is clear that there are strong economic reasons for international trade to occur

Question 2

Arguments in favour of protectionism include

Answer 2

Infant industries
dumping
Domestic employment
Externalities
balance of payments

Question 3

describe infant industries

Answer 3

Young industries are unlikely to be able to compete against established MNC’s in developed countries, thus require protection, at least in the short term

Question 4

describe dumping

Answer 4

Over-production in developed countries may be released into the markets of developing nations, which undercuts domestic prices and domestic producers may be forced to leave the market

Question 5

describe domestic employment

Answer 5

Protectionist measures might help to protect domestic jobs if infant industries are allowed to grow or local businesses aren’t undercut by MNC’s from developed countries

Question 6

describe Externalities

Answer 6

Some goods, such as illegal drugs and weapons may be considered to have significant harmful effects on society, and should be blocked from domestic markets

Question 7

describe balance of payments

Answer 7

Placing restrictions on imports may help to reduce a balance of payments deficit on current account

Question 8

what are the protectionist measures

Answer 8

tariffs
import quotas 
 Government legislation
Domestic subsidies
Embargoes

Question 9

describe tariffs

Answer 9

Taxes placed on imported goods that are not applied to domestic goods
Consumers face a higher price
However, domestic industries are protected from overseas competition

Question 10

describe import quotas

Answer 10

A physical limit on the volume of imports entering a country
For example, Thailand has imposed a quota of 54,440 tonnes of corn on China

Question 11

describe government legislation

Answer 11

Countries might employ measures such as complex legal forms, health and safety inspections and specific product specifications
These will discourage imports by raising costs

Question 12

describe domestic subsidies

Answer 12

Government payments to domestic businesses to help reduce production costs and improve competitiveness

Question 13

describe embargoes

Answer 13

A total ban on imported products

The UK has imposed embargos on Syrian oil exports as a political measure