4.1.4 Protectionism

Question 1

what is free/ open trade?

Answer 1

an economic policy of not discriminating against imports from and exports to other countries

Question 2

what are they key benefits of open trade?

Answer 2

-countries can benefit from comparative advantage
-businesses can achieve economies of scale
-encourages competition and economic efficiency
-enables businesses to grow beyond their domestic borders

Question 3

what does the WTO aim to do?

Answer 3

it ensures that trade flows as smoothly, predictable and freely as possible
-it deals with the global rules of trade between nations

Question 4

protectionism

Answer 4

any attempt by a country to impose restrictions on trade in goods and services
-to protect its own industries

Question 5

explain why protectionist measures may be implemented due to infant industries

Answer 5

to protect younger industries who cannot compete against established MNCs in developed countries (short term)

Question 6

explain why the risk of dumping may lead to protectionist measures being put in place

Answer 6

over production in developed countries may be released in developing (host) nations, undercutting domestic prices forcing firms to leave market

Question 7

explain why protectionist measures may be implemented due to domestic employment

Answer 7

these measures may help protect domestic jobs if infant industries can grow and local businesses aren’t undercut by MNCs in developed countries

Question 8

explain why protectionist measures may be implemented due to externalities

Answer 8

some goods, such as illegal drugs and weapons may be seen has harmful to society so are blocked from domestic markets

Question 9

explain why protectionist measures may be implemented due to balance of payments

Answer 9

Placing restrictions on imports may help to reduce a
balance of payments deficit on current account​

​exporting more than you import = strong balance

Question 10

name five main protectionist measures

Answer 10

-tariffs
-quotas
-government legislation
-domestic subsidies
-embargos

Question 11

tariffs

Answer 11

taxes placed on imported goods that are not applied to domestic goods
-this increases selling price for consumers
-domestic industries are protected from overseas competition

Question 12

quotas (import)

Answer 12

a physical limit on the volume of imports entering a country
-can also help balance of payments

Question 13

government legislation

Answer 13

countries might employ measures such as complex legal forms, health and safety inspections and specific product specifications
-this discourages imports by raising costs
e.g. mandatory quality checks, quality of materials etc

Question 14

domestic subsidies

Answer 14

government payments to domestic businesses to help reduce production costs and improve competitiveness

Question 15

embargoes

Answer 15

a total ban on imported products
e.g. UK embargo on Russia for oil and energy