protectionist policies

Question 1

why may a country adopt protectionist policies ?

Answer 1

protect infant firms
sunset industry (a decline industry that will most likey become extinct)
employment
current account deficit
labour / environmental regulations

Question 2

reasons why may a country adopt protectionist policies explained

Answer 2

protect infant firms - To protect new firms that would be unlikely to succeed at start-ups due to the level of global competition. Once established support is removed

sunset industry-hese firms are on their way out, and the government chooses to support them to help limit the economic damage that would occur if they closed abruptly
There is a welfare loss as inefficient industries are producing at the expense of more efficient global producers

employment - When firms outsource production to other countries
Or certain industries are experiencing structural unemployment governments will step in to protect jobs

current account deficit - When imports > exports, the amount of money leaving the country to support foreign firms is greater than that entering to support domestic firms
Protectionism aims to correct this imbalance

Labour/environmental regulations-Many countries offer cheap labour and low-cost production due to poor environmental regulations
Protectionism can help apply pressure to bring about change in these countries

Question 3

what are the consequences of protectionism

Answer 3

1)prices increase
2)exports become less competitive
3)misallocation of resources
4)inefficient domestic firms
5)retaliation from other countries
6)choices reduce
7)costs increase

Question 4

what are the consequences of protectionism

Answer 4

1)Reduced choice: Protectionism reduces both the quantity and variety of goods/services available to customers

2) Increased prices: Protectionism either reduces the supply of goods and services, which leads to higher prices, or in the case of tariffs, directly leads to higher prices

3) Increased costs: Manufacturers who rely on imported raw materials face higher production costs. If protectionism is widespread, it may generate inflation in the economy and/or lead to a loss of employment

4)Retaliation: Foreign producers are hurt by protectionism and it is common for their governments to retaliate with their own measures, which further harm free trade

5) Reduction in export competitiveness: Protectionism reduces the need to be efficient or to innovate. Over time, this leads to higher prices and worse quality products which will reduce export sales

6) Resource misallocation: Global welfare is reduced as protectionism shifts production away from more efficient foreign producers to less efficient domestic producers

7) Domestic inefficiency increases: With a reduced level of competition, domestic firms will be less productively efficient and will spend less on research, development and innovation