Free Trade and Protectionism

Question 1

Free trade

Answer 1

No barriers to trade put into place by government

Question 2

Protectionism arguments for

Answer 2

Protects domestic employment, protects against labour law costs, protects infant industries, avoids overspecialisation, to protect strategic industries, to prevent dumping, to protect product standards, to raise government revenue, to overcome a balance of payments deficit.

Question 3

Arguments against protectionism

Answer 3

Misallocation of resources (inefficient domestic producers), trade wars can occur, domestic complacency (no need to become more efficient), reduced export competitiveness

Question 4

Dumping

Answer 4

When a country exports goods to another for a price less than the average cost to produce it

Question 5

How does protectionism prevent over specialisation?

Answer 5

If the amount of industries in a country decline, they can become reliant on the success of the remaining specialist industries.

Question 6

Tarriff

Answer 6

A tax that is charged on imported goods which increases the cost of importing goods.

Question 7

Quota

Answer 7

A restriction on the number of imports that are allowed in the country

Question 8

Trade subsidies

Answer 8

A subsidy paid by the govt to domestic producers to make them produce more goods, thus less imports are required.

Question 9

Adminstration barriers

Answer 9

Legal work, health and safety and environmental standards and embargoes (complete bans on imports from a certain country)

Question 10

Nationalistic campaigns

Answer 10

Marketing campaigns to encourage consumers to purchase domestically produced goods