PROTECTIONISM

Question 1

protectionism

Answer 1

the placement of legal restrictions on international trade

includes: tariffs, quotas, subsidies and other bureaucratic barriers

Question 2

infant industries

Answer 2

are those that are newly developed and have not had an opportunity to develop the economies of scale and low costs that are achieved by selling to a large market

Question 3

dumping

Answer 3

the selling of goods to another country at a price below the original domestic production costs

Question 4

arguments for protectionism x10

Answer 4

1. to protect domestic employment
2. to protect sunrise industry
3. to prevent dumping of foreign goods onto the domestic market
4. to diversify production base of a developing country
5. to enforce product standards
6. to raise gov revenue
7. to protect against unfairly low labour costs
8. to protect strategic industries
9. to overcome balance of payments deficit
   - -> expenditure switching
10. to improve terms of trade

Question 5

arguments against protectionism x6

Answer 5

1. misallocation of resources
   - -> unnecessary allocation of income to inefficient producers+ consumer surplus decreases due to >P
2. escalation to a trade war
3. protectionism as a corruption magnet
   - -> incentive to bribe lawmakers
4. domestic complacency causes higher prices/ costs
   - ->no incentives of competition
5. higher import costs
6. reduce export competitiveness
   - -> firms that use imported resources pay higher costs
   - ->workers/resources drawn away by inefficient producers

Question 6

types of protectionism x7

Answer 6

1. tariffs
2. quotas
3. subsidies
4. VERs
5. administrative barriers
6. nationalistic campaigns
7. exchange rates

Question 7

tariffs

Answer 7

an import tax placed on a good produced abraod

Question 8

quota

Answer 8

limit on the physical quantity of a good that can be imported into the country

Question 9

VER

Answer 9

voluntary export restrains
is self imposed quota
put in place by importing countries or industry

Question 10

subsidy

Answer 10

in the international context is a gov payment to a firm that can be used to promote exports and/or reduce the quantity of imports

Question 11

administrative barriers

Answer 11

1. bureaucratic barriers
   - -> paper work/legal requirements= frustration
2. product standards
   - ->health/safety…
   - -> EU/UK/Japan: hormone free beef :( US
3. environmental standards
   - ->japanese whalers say its a legitimate activity; based on the use of available resources thus restrictions are disguised as protectionism
4. qualifications
   - -> justified as raising professional standards… they may prevent capable workers from relocating

Question 12

exchange rates

Answer 12

countries who can choose to intentionally manipulate their exchange rates to encourage exports as China has allegedly done in recent years

Question 13

nationalistic campaings

Answer 13

boost domestic demand

-ve: cost of advertising/ promotion can be sig when measured against the results