4.1.4 Protectionism

Question 1

protectionism involves?

Answer 1

any attempt by a country to 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 to encourage domestic production by lowering costs/ any form of government support provided to consumers/producers

• money -> local producer = cheaper in domestic market
• artificially raises price of foreign goods relative to domestic = demand

Question 5

3 adv of subsidy

Answer 5

adv:
1-poorer jobs protected(recession)-slow industry decline
2- supply and consumption of domestic product
3– boost demand for industries e.g. post recession

Question 6

tariff/ impact on business

Answer 6

• duty that raises the price of imported products = reduce domestic demand & expand domestic supply
• raise tax rev for local business & increase domestic production (foreign producers cut product = impact employment) = less foreign comp
• protect domestic/infant industries from foreign comp (MNCs) = increase import prices
• protect ageing/inefficient industries

Question 7

5 advs of tariffs

Answer 7

adv:
- 1opening point for negotiation
- 2set policy = receive money, product revenue on goods and services brought into country
- 3domestic goods= competitive price
- 4job security
- 5aid growth and GDP and source of tax revenue

Question 8

quotas / impact on businesses

Answer 8

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

Question 9

adv of quotas

Answer 9

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

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

Question 15

5 Dis of subsidy

Answer 15

• 1dependant on it
• 2env risk -> excess producing
• 3fund from taxation/borrowing = risk
• 4limited impact to correct market failure
• 5unfair competition and encourage inefficiency

Question 16

Dis of tariffs

Answer 16

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 17

Dis of quotas

Answer 17

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 18

Export

Answer 18

send (goods or services) to another country for sale.

Question 19

Import

Answer 19

bring (goods or services) into a country from abroad for sale.