Protectionism Flashcards
What Is Protectionism?
Protectionism is an economic policy that seeks to shield a country’s domestic industries from foreign competition.
Examples of Protectionist measures
Tariffs
Quotas
Subsidies
Trade regulations
Licensing requirements
How is protectionism beneficial?
A country can protect its domestic industries from unfair competition or practices, preventing job losses and maintaining economic stability.
May also be employed to nurture the growth of strategic industries, so they maintain competitive.
What is the infant industry arguement?
A rationale that supports protectionism.
Basically idea that newly emerging industries are too small-scale to compete with more established and efficient international industries. To nurture these developing industries, protectionist policy’s are implemented temporarily to allow these industries to mature and compete globally.
What is the sunset industry argument?
Some industries are declining, and are in need of refining before competing internationally. So temporary protectionist policies allow them to regrow or redirect resources to more promising industries.
Example of infant industry arguement
In the 19th century, the US steel industry was still emerging and relatively developing, and was facing competition from technological European steel producers. To gain an advantage, the US imposed tariffs on imported steel. Over time, the US became a vital global player in the market, allowing them to reduce their restrictions.
Example of sunset industry argument
There has been a gradual decline in traditional coal mining in many developing countries due to the increasing concerns about environmental sustainability and shifts toward renewable energies. This has made countries implement protectionist policies, aswell as support the transition of workers away from coal dependant economies.
How can an increase in protectionism lead to a corrected trade deficit?
As they’re restricting imports into their country, allowing the current account to re-balance.
What are quotas?
Trade restriction that sets a specific or limit on the quantity of imported/exported goods during a specific time.
What are tariffs?
Taxes or duties imposed by a government on imports or exports.
Negatives of Protectionism
Reduced international trade
Higher consumer prices
inefficiencies
Retaliation
How does protectionism cause reduced international trade?
By imposing protectionist policies, it can reduce international trade which can hinder economic growth and opportunities for businesses.
How does protectionism cause high consumer prices?
Restrictions on imports usually means consumers have fewer choices and face an increase costs for domestically produced goods.
How does protectionism lead to inefficiencies?
Shielding of competition may lead to inefficiencies and lack of innovation, as industries face less pressure to improve and become more competitive.
How does protectionism lead to retaliation?
Other countries may respond with their own trade restrictions, leading to trade was which will negatively impact global economic stability.
