38.Protectionism

Question 1

What is Protectionism

Answer 1

approach used by governments to protect domestic producers.

Question 2

Trade Barriers

Answer 2

A measure designed to restrict imports

Question 3

Reasons for Protectionism

Answer 3

Prevent Dumping: where a foreign producer sells goods below cost in a domestic market to destroy overseas markets.
Protecting Employment
Protect Infant Industries
To gain Tariff revenue
Reduce current deficits

Question 4

Retaliation

Answer 4

To take action against dumping. They may do this by imposing heavy taxes on goods coming into the country. Retaliation may also occur if a ocuntry imposes trade barriers on exporters

Question 5

Methods of Protection

Answer 5

Tariffs
Quotas
Subsidies

Question 6

Tariffs

Answer 6

Tax on imports to make them expensive will reduce demand for imports and offset the effects of a stronger currency, and may also increase revenue for the government.
However, if tariffs are set too high imports may cease, and GR IS ZERO

Question 7

Quotas

Answer 7

Physical limit on the amount allowed into a country where domestic producers face less of a threat and have more market for themselves.
However, quotas will raise prices due to less cheap imports

Question 8

Subsidies

Answer 8

Financial support or tax breaks to exporters or domestic producers that face fierce competition from imports. This will lower prices for consumers as it reduces production costs and increases supply, forcing equilibrium prices down.

Export subsidies will encourage domestic firms to enter the market , helping to boost employment and improve the current account.

However, it costs government money which can be a high opportunity cost where it can be spent more effectively on other government services

Question 8

Embargo

Answer 8

Official order to stop trade in a country