Restrictions on free trade 4.1

Question 1

Protectionist Measures 5

Answer 1

Quotas - physical restriction on the quantity of imports

Subsidies

Administrative and Product Regulation Barriers

Tariffs - tax on an imported good

Exchange Rate Manipulation

Question 2

Reasons for Protectionist Policies 3

Answer 2

To protect an ‘infant industry - Used by USA & Japan when they couldn’t compete with European powerhouses (this needs high skilled labour to be effective)

Protecting jobs

Protection from dumping (when a country/firm with surplus goods sells these off to other countries at very low prices, harming domestic producers). e.g. China places tariffs on steel tubes from the EU & Japan to prevent dumping

Question 3

Impact of Protectionist Policies on Consumers

Answer 3

Higher prices and less choice

Question 4

Impact of Protectionist Policies on Producers

Answer 4

Domestic producers can benefit, but those who use imported goods may have increased costs

Question 5

Impact of Protectionist Policies on Governments

Answer 5

They may benefit from increased tax revenues if tariffs are introduced, could lead to lower revenue in the long-run due to lower growth

Question 6

Tariff Diagram

Answer 6

(9 Macro Diagrams)