LS3- Restrictions on Free Trade Flashcards
1
Q
Free trade
A
- international trade without restrictions such as tariffs
2
Q
Protectionism
A
- any barrier that restricts free trade between two nations
3
Q
Reasons for protectionism
A
- Infant industry argument -> allows developing domestic firms to achieve the same kind of EoS, enabling them to become internationally competitive- evaluation: you are allowing these firms room for inefficiency
- preventing dumping- can often come from other countries as a result of excess supply due to minimum pricing or subsidies
- protect against domestic unemployment if gov thinks structural unemployment will rise, they may adopt protectionist measures- evaluation: if industry was already going to decline, you are just longing the process, better to allow for natural disintegration of an industry
4
Q
Why a country would use trade protectionism for national security
A
- may decide to prevent g/s entering a country if it believes there is a risk to national security
e.g. US putting pressure on firms to not use Chinese technology in critical infrastructure projects
5
Q
Why a country would use trade protectionism for public safety
A
- could ban or restrict g/s that pose a danger to public health
e.g. imports of beef banned by EU due to Mad Cow Disease
6
Q
Why a country use trade protectionism for tax revenue
A
- for developing countries, tariffs are an important source of tax revenue
- administrating tariffs is easier than other taxes e.g. income taxes
7
Q
Tariffs
A
- a tax on imports or exports
e.g. Trumps tariffs on steel and aluminium
8
Q
Quotas
A
- a limit on the number of imports allowed for a product into a country
9
Q
Embargo
A
- official ban on imports or exports
e.g.firearms in most countries
10
Q
Impact of protectionist measures on producers
A
- producers gain an advantage over foreign competitors through state support
- state support shouldn’t be given unconditionally to prevent lack of export discipline
11
Q
Impact of protectionist measures on consumers
A
- embargo’s and quotas limit choice for consumers
- tariffs make goods more expensive
12
Q
Impact of protectionist measures on governments
A
- for developing countries, tariffs = large source of gov. revenue
- for developed countries, protectionist measures can = political support and protect industries strategically important
e.g. trump protected steel and aluminium industries to gain votes in the states that produced this
