Methods Of Protectionism Flashcards
What is protectionism?
The theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports.
What are some disadvantages to protectionism?
- It could lead to a trade war between two separate countries.
- Trade allows for a good comparative advantage.
- Some goods could disappear domestically due to an inability to trade with other countries. For instance, if bananas cannot be grown domestically then the country will not have access to bananas.
- Less developed countries may suffer as they may lose a comparative advantage and also lose money from tariffs.
- Protectionism an cause inflation, so persons with lower income will suffer financially.
What are some advantages to protectionism?
- A newly developed industry would struggle to compete in the world stage without certain restrictions put in place.
- It makes domestic jobs.
- Without trade there would be no tariffs; therefore people will have a higher income as trade will be cheaper so firms will make more money to pay the employees with.
- Without trade less country’s would be exploited.
- Dumping could cause less profit for domestic businesses, and this will be prevented.
- It will encourage local businesses to innovate.
What is a tariff?
This is placing taxes on imports to reduce the number of imports.
Name all 7 methods of protectionism
Tariffs Quotas Embargos Export subsidies Import licensing Exchange controls Voluntary export restraint arrangement
What does a tariff do to the demand and supply graph?
It would move the supply of imports to the left due to an increase in price and a reduction to the quantity supplied because of a increase in price.
What is a quota?
Limit the amount of goods that are allowed to enter the country.
What is an embargo?
A complete ban on all trade in and out of a country
What are export subsidies?
When the government gives funding for exports.
What does export subsidies do to the aggregate supply curve?
As export subsidies encourage exportation the supply of goods will increase, therefore moving the curve to the right.
What is import licensing?
Import licensing is when certain standards are placed on internationally traded goods.
What are exchange controls?
A governmental restriction of the movement of currencies between countries.
What is a voluntary export restraint arrangement?
Voluntary export restraints (VER) are arrangements between exporting and importing countries in which the exporting country agrees to limit the quantity of specific exports below a certain level in order to avoid imposition of mandatory restrictions by the importing country.
