Theme 4 CC2 - Impact of protectionist policies (Rest on physical flashcards)
What is the Impact of protectionist policies on consumers
● There are higher prices for consumers as they are unable to buy imports at the cheaper price. It tends to raise the price of domestic producers since goods and services needed for the production of these goods may also suffer from import controls (importing raw materials cost may rise due to retaliation) and it limits the competition for domestic producers so they have less incentive to be efficient.
● Moreover, they suffer from less choice.
What is the Impact of protectionist policies on producers?
● Domestic producers tend to benefit from import controls since they have less competition so can sell more goods at a higher price than otherwise and they will benefit from measures to increased exports.
● However, they may suffer from higher costs if there are controls on the imports they need for production.
● Foreign producers will lose out as they are limited in where they can sell their goods. Inefficient domestic producers are kept in production, whilst efficient foreign ones lose out.
What is the Impact of protectionist policies on government?
^GOVT revenues
● Evidence suggests that there is little difference to employment figures.
● It can be argued that allowing inefficient firms to close would be better for workers in the long run. The market would reallocate resources and create new jobs, with greater security.
● Following the steel tariffs imposed in America in 2018, it is estimated that 16 jobs will be lost elsewhere for every job gained in the steel industry. (The Economist)
● However, Argentina have been successful at implementing tariffs which protect jobs
What is the Impact of protectionist policies on living standards?
● As the tariff diagram shows, the imposition of import controls results in deadweight welfare loss.
● It also causes trade wars since the introduction of restrictions often leads to retaliation by other countries. A recent example of this is the US-China trade war, where each country continues to impose more tariffs on the other’s goods. This causes a reduction in trade and a reduction in growth
What is the Impact of protectionist policies on equality?
● It has a regressive effect on the distribution of income as the rise in price affects the poorer members of society far more than the well off as it is they are no longer able to afford the products.
