Edexcel-Protectionism 4.1 Flashcards
Protectionism
Government seeks to protect domestic industries from foreign competition by imposing restrictions on trade in goods and services.
Tariff
A tax placed on imported goods from other countries.
Tariff example
Tennis rackets imported from China to Uk have 4.7% tariff.
Benefits of tariff’s
Protect infant industries and allow them to expand.
Protect domestic jobs.
Reduces dumping.
Infant industries
Industry in early stages of development in an economy.
Dumping
When a business sells products abroad in export markets at significantly low prices.
Disadvantages of tariff’s
Increases costs of imported raw materials.
Reduces competition for domestic firms who may become more inefficient.
Protectionist measures often lead to retaliation.
Import quota
A government imposed limit on amount of a particular product allowed into the country.
E.g. of Import quota
China set import quota on Cambodian rice of 5.32 million tonnes.
Benefits of Import Quotas
Domestic businesses hire more staff which reduces unemployment
Countries able to easily change import quotas.
Foreign countries find quota’s less confrontational than tariffs.
Disadvantages of Import Quotas
Supply limited, price of product increases.
May generate tension with trading partners.
Domestic firms may become more inefficient as quotas reduce level of competition.
Government legislation
Governments can impose laws to restrict certain imports.
E.g. of government legislation
Uk banned imported chickens from USA due to their use of chlorine.
Benefit of government legislation
Allow domestic firms to grow as they have limited competition.
Drawbacks of government legislation
Can lead to retaliation from countries facing the legislation.
Domestic subsidies
Payments given to domestic businesses to help lower costs of production.
E.g. of Domestic subsidies
Post Brexit government provided farmers with subsidies to lower costs of production.
Benefits of domestic subsidies
Makes domestic firms more competitive.
Businesses remain competitive which protects jobs.
Drawbacks of domestic subsidies
Businesses may become inefficient as they know costs are being subsidised.
Import licensing
Governments grant importers the license to import goods.
Exchange controls
Form of protectionism involves limiting currencies that can move between countries.
Intellectual property laws
Patents and Copyright protection
Protecting domestic ideas and products
