Protectionism

Question 1

Protectionism definition

Answer 1

G policies that restrict international trade to help domestic industry

Question 2

Benefits of Protectionism

Answer 2

Infant industry

• short term
• give time to allow this industry to develop economies to scale and to grow in size
• then take away protectionism when they can compete
• BUT allowing room for inefficiency

Protect against dumping

• sale of a good below its cost of production
• short term: consumers benefit from lower prices
• longer term: forces domestic industries to be out of business and allow the foreign firm to establish itself as a monopoly
• BUT it is very hard to prove that dumping actually taken place

Protect domestic employment

• if it is difficult to compete with international firms, domestic industry will decline
• BUT if the industry is already declining, protectionism is just longing out the process that is already going to happen
• should just allow workers to move into other industries naturally

To improve CAD

• high economic growth
• less import
• BUT retaliation