Protectionism

Question 1

What is protectionism?

Answer 1

Protecting domestic producers from foreign competition

Question 2

What tools of protection are there?

Answer 2

Tariffs
Import Quotas
Export subsidies
Embargoes
Excessive Administrative burdens(‘red tape’)

Question 3

Tariffs

Answer 3

A tax imposed on imports. Sometimes tariffs may be imposed on exports.

Question 4

Arguments for protectionism

Answer 4

To protect infant industries
To protect declining industries
To protect strategic industries
To prevent dumping
To improve the terms of trade
To improve the balance of payments
To provide protection from cheap labour

Question 5

The arguments against protectionism

Answer 5

Prevent countries from specializing in the products in which they have a comparative advantage - this can lower global output and living standards.
Reduce international competition, increase prices, and lower the quality of products.
Reduce the choice of products available to consumers.
Lowering the size of firms’ markets reduces their ability to take advantage of economies of scale.
Reduce firms’ choice of raw materials and capital goods which may increase costs of production
Results in a trade war, with tariffs pushing up prices