Premium Essay


In: Business and Management

Submitted By ariaria
Words 634
Pages 3
Protectionism is defined as the government actions and policies that restrict or retain international trade, often done with the intent of protecting local business and jobs from foreign competition. Typical methods of protectionism are:
● import tariffs - import taxes.
● quotas - quantitative limits on the level of imports allowed.
● export subsidies - a payment to encourage domestic production by lowering their costs.
● Import licensing - governments grants importers the license to import goods.
● Exchange controls - limiting the amount of foreign exchange that can move between countries.
● cuts to local businesses.
Quotas, embargoes, export subsidies and exchange controls are all examples of non-tariff barriers to international trade.
There is significant debate surrounding the merits of protectionism. Critics argue that, over the long term, protectionism often ends up hurting the people it is intended to protect and often promotes free trade as a superior alternative to protectionism. Tariffs, non-tariff barriers and other forms of protection serve as a tax on domestic consumers. Moreover, they are very often a regressive form of taxation, hurting the poorest consumers far more than the better off.
Protectionism is frequently criticized by mainstream economists as harming the people it is meant to help. Most mainstream economist instead support free trade. Economic theory, under the principle of comparative advantage, shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.

Comparative Advantage
Comparative advantage refers to a country's ability to produce a particular good with a lower opportunity cost than another country.
Protectionists believe that there...

Similar Documents

Premium Essay


...Trade protectionism is any economic policy by a government to impose restrictions on import goods and services, provide special preferences to domestic goods and services to enhance the competition. There are two basic ways of trade protectionism, one is tariff barrier, another is called non-tariff barriers, including quotas, subsides and administrative barriers. This essay is to talk about the main ways of protectionism and its definition with some real examples. Tariffs are import taxes, raising the price of imported products to limit the number of imports, causing a contraction in domestic demand and an expansion in domestic supply (Riley, 2006). Normally, the volume of imports is reduced and the government received some tax revenue from the tariff. While, the Section 201 steel tariff is another case. In 2002, US imposed tariffs on imports of certain steel products for three years and one day (Francois & Baughman, 2003). Immediately, the European Union announced that it would impose retaliatory tariffs on the U.S., thus risking the start of a major trade war (Francois & Baughman, 2003). In this way, the price of both sides got higher, made impacts on each other. Steel tariffs caused shortages of imported product and put U.S. manufacturers of steel-containing products at a disadvantage relative to their foreign competitors. As a result, 200,000 Americans lost their jobs to higher steel prices during 2002. In the absence of the tariffs, the damage to steel......

Words: 707 - Pages: 3

Free Essay

End Protectionism

...English Comp 10 December 2014 End Protectionism. Table of Contents Section 1: Introduction---------------------------------------------------------------------------------- 3 Section 2: What is Protectionism?-------------------------------------------------------------------- 3-9 Section 3: Why does it occur? ------------------------------------------------------------------------- 9-10 Section 4: Arguments For ------------------------------------------------------------------------------10-13 Section 5: Conclusion------------------------------------------------------------------------------------13-15 Works Cited-----------------------------------------------------------------------------------------------16 Section 1: Introduction The United States should institute a blanket reform of its international trade policies. Its current protectionist practices are both in violation of current World Trade Organization suggestions and mandates and, far from being beneficial to the American economy, for the most part serve to hurt both American and foreign consumers. There are few American markets not protected in some way by the Federal Government in the form of tariffs, quotas, or domestic subsidies. While these practices are touted as an aid to domestic manufacturing process, true economic analysis shows that most if not all protectionist measures actually serve to limit economic growth. The arguments given to justify protectionism range from the poorly-disguised......

Words: 3525 - Pages: 15

Premium Essay

Macroeconomics – Protectionism

...Macroeconomics – Protectionism Video 05/01/15 T. Taylor – Macalester College Protectionism: Laws or rules that reduce or shut out import The intent of such laws is to protect various industries * Import Quotas * Taxes/ Tariffs * Voluntary Export Restraints * Non-tariff Barrier Protectionism def protects those it is intended to protect, however; Consumers pay the cost of protectionism. Firms that are protected can earn more money and consumers will pay more for the good. Just a way for a government to provide an indirect subsidy, creating higher consumer prices. Direct Subsidy: Indirect Subsidy: Both cause consumers to pay more so firms can make more money. How can it benefit workers? Poss. effects * Total # of jobs * - avg level of wages * Prevent job switching * Change quality of wages Zero evidence that international trade effects the total number of jobs. Trade should have little to do with employment level. Siclicale : tide to inflation Or Natural Rate of Employment If all trade was stopped it would not solve the unemployment problem. Protectionism can help redistribute jobs, but can not Shutting out imports to keep wages high? Can help in the industry being protected, but not all industries as a whole (or the rest of the economy) Wages will be effected by productivity. (Not immediately, but over time) Inequality reduced with more protectionism? Consensus seems to be that globalization seems to be…. Most......

Words: 482 - Pages: 2

Premium Essay

Trade Protectionism

...The current economic situation has divided opinion on the use of trade protectionism.’ Discuss. ECONOMIC CRISIS AND PROTECTIONISM: A DISCUSSION Introduction First and foremost to logically explore the question at hand, the meaning of trade protectionism must be fully comprehended, according to Amadeo (2012) “Trade protectionism is used by countries when they think their industries are being damaged by unfair competition by other countries” The fundamental commotion of the pre-Great Recession on the economic order that was based on the assumption of inherent value of unlimited trade and capital flows has led to the new emergence of debate on trade protectionism as the means of combating the present crisis. In particular, the European Union (EU) nations have seen increasing calls for the implementation of the more protectionist economic policies. However, given the integrated and interconnected nature of both modern and specific national economies, one may note that protectionist policies would be more likely to hurt economic recovery and contribute to the sharpening of international trade contradictions. This paper presents an account of both parties’ argument, with the recourse to respective quantitative data, in order to substantiate the claim on infeasibility of treating protectionism as a cure for global and European economies’ maladies. The Impact of Protectionism on Crisis and Post-Crisis Developments According to Henn & McDonald (2011), trade......

Words: 1949 - Pages: 8

Premium Essay

The Effect of Protectionism on the U.S. Economy

...Hunter Pinion The Effect of Protectionism on the U.S. Economy Free trade on a global scale is referred to as Globalization. This occurs when a nation imports and exports goods to other countries without imposing barriers such as tariffs or subsidies. Tariffs are imposed by way of taxation of a specific imported good in order to protect the sale of similar domestic goods, while subsidies are government funds paid to domestic producers so that they can sell the product at a price below marginal cost. Sometimes the government will outright ban a specific foreign product! Each of these policies keep foreign producers from effectively selling their products to the U.S. market because most consumers will buy whatever good or product is cheapest. Some Americans believe that these tariffs and subsidies are beneficial to the U.S. economy because they help to “save American jobs” and these ideals are referred to as protectionism. Those in favor of this protectionism agenda have made several arguments one of which is saving American jobs. While saving American jobs is a nice thought, this protectionist agenda has many adverse effects that contradict this very idea. Take for example the American steel industry which has to compete on a global level in order to maintain its grip on the economy. Other countries are able to produce steel at a price cheaper than what it costs in America so in turn they can sell their product at a lower price. Of course any consumer in need of steel......

Words: 1009 - Pages: 5

Premium Essay

The Global Financial Crisis and Protectionism

...------------------------------------------------- The Global Financial Crisis and Protectionism QUESTION 1: Why do you think calls for protectionism are greater during sharp economic contractions than during boom periods? * Protection of their own economic industries and to curb job losses * Interdependent economy to lessen the impact of economic loss on food, fuel and property prices * To protect job losses at national producers and possible bankruptcy * Developing countries were concerned about safety rules and environmental concerns. * In an emerging economy, a barrier to trade and blocking of imported goods due to safety and environmental reasons could spark entrepreneurs to grow the local economy with local jobs and local suppliers Protectionism = “Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition. Typical methods of protectionism are import tariffs, quotas, subsidies or tax cuts to local businesses and direct state intervention.” ( QUESTION 2: Despite the sharp economic contraction during 2008-2009, the increase in protectionist measures was fairly modest. Why do you think this was the case? * After the 1930 economic slump, some of the trade constraints did more harm than good. * The WTO instituted protectionist measures to protect countries and provide a more......

Words: 663 - Pages: 3

Free Essay

Critically Evaluate the Potential Justification for Protectionism

...Critically evaluate the potential justification for protectionism Introduction A number of governments are concerned with unemployment and recessionary impact following the financial crisis. The result of this has been for many to be being placed under political pressure to implement protectionist instruments such as tariffs. quotas and subsidies (Love et al, 2014). This essay will identify the five principal instruments used by governments for protectionism and their consumer welfare implications. It will then seek to critically evaluate the justifications used for protectionism. Protectionist instruments and their welfare implications Protectionist instruments can be defined as a policy though which a government seeks to control international trade for the purpose of protecting local businesses or employment from foreign competition (Krugman et al, 2012). A Tariff is a tax which is levied on imported goods. Tariffs on goods increase their price in an economy and can be specific or ad velorum i.e. a proportion of the value of the good against which a tariff is raised. Tariffs impact on the welfare of market participants can be considered in the context of small countries (where foreign export prices cannot be affected) and large countries (where they can), the outcomes for which may be different. In small countries where tariffs are introduced, importing economies experience increases in imported goods and the price of substitutes manufactured locally, reducing......

Words: 1824 - Pages: 8

Premium Essay

Impact of Protectionism Trade Policy on Trade

...A Report On “Impact of protectionist trade policy on the domestic industry and economy” Course Name International Economics Course Code FIN: 2210 Submitted To: Shaikh Masrick Hasan Lecturer Department of Finance Jagannath University Submitted By: Sohel Rana On behalf of Group-06 2nd Year 2nd Semester, 6th Batch Department of Finance Jagannath University Date of Submission: 22-02-2014 Group Members SL. NO. | NAME | ID NO. | 1 | SOHEL RANA | B 110203076 | 2 | NURNOBY RAHMAN | 115234 | 3 | UZZWAL HALDER | B 110203046 | 4 | IMAM HOSSAIN | B 110203026 | 5 | FARHANA BHUIYAN | B 110203106 | 6 | SUMAIYA YASMIN | B 110203104 | 7 | HAFIZUR RAHMAN | B 110203025 | 8 | FATEMA AKTER | B 110203006 | 9 | KHALILUR RAHMAN | B 110203055 | 10 | TOHIDUL ISLAM | B 110203024 | Letter of Transmittal Shaikh Masrick Hasan Course Coordinator Money and Banking Dept. of Finance Jagannath University Subject: To submit a report on “Impact of protectionist trade policy on the domestic industry and economy” Sir With a great respect, we are informing you that we have prepared a report on “Impact of protectionist trade policy on domestic industry and economy.” We feel great pleasure for submitting this report to you, which will...

Words: 5333 - Pages: 22

Premium Essay


...Argument for the Protectionism 1) National Security If a product is used in manufacturing military goods or anything that is threat to the defense, then it is wiser to not import those products. Protectionism, in this case, helps the domestic industries through trade restrictions to make sure that the supply for the products is abundant. 2) Counteracting Dumping Dumping is the economic policy where the company exports the products to the foreign market and sell them in lower price than in the domestic market or lower than the cost of production in order to establish monopoly and eliminate competitions. Sometimes foreign industries are subsidized by the country allowing those industries to charge at lower price in international trade. These companies would have an advantage over the ones not subsidized. So, the dumping should be retaliated through tariffs, quota and other trade restrictions 3) Protection of Infant and Domestic Industries Domestic and infant industries lack the competitive advantage over foreign mature industries. The situation then could create almost a hopeful situation for the domestic industries, not being able to compete with the market. So, to let the domestic industries flourish in the market, the country should protect the market through trade restriction. 4) Reduction of Trade Deficit Trade deficit is the situation when a country’s value of imports exceeds the value of exports. If a company is protected from the foreign......

Words: 458 - Pages: 2

Free Essay


...INDITEX’S Operations Overview INDITEX (Industria de Diseño TextiL) is a Spanish cosmopolitan company that deals in clothing and textile. The company has its headquarters in Arteixo, Glalicia and is a composition of approximately a hundred firms that designs, produces and distributes textiles and other related products. INDITEX is the largest fashion group globally and runs over six thousand two hundred retail stores across the globe. Is Protectionism Good? Why Trade protectionism is the government measures and policies that tend to limit international trade with the intention of protecting local business entities, resources, as well as jobs from external competition. This can be achieved through enaction of import tariffs, tax subsidies on local businesses and other direct government interventions. Most countries use this when they feel that the local industries are being destroyed by an imbalanced competition from the foreign entities, and are normally politically driven. Protectionism is considered to be a good move by nations due to several reasons such as protection of a nation’s culture. It protects the culture from dilution. Secondly, it protects young and upcoming companies from ‘dumping’, which is selling products at throw away prices than it should be in a bid to attract certain markets. Such companies enjoy the protection until the time they are able to compete fairly. The protection also extends to the local fully established industries since they are......

Words: 501 - Pages: 3

Premium Essay


...“Why do most states try to restrict trade?” ECOP1003 31st August 2009 Jeffrey Chiang 309021863 Literally, “trade is the oldest and most important economic nexus among nations” (Gilpin 1987: 171); in fact, “trade along with war has been central to the evolution of international relations” (ibid). Trade has been considered essentially important for centuries for the reason that it provides wealth from the taxation of trade for politicians and the states (Gilpin, 1987). In the years since World War II, world trade has technically become free trade (Economist, 2009). By definition, free trade is a term that is used to describe “the ability of people to undertake economic transactions with people in other countries free from any restraints imposed by governments or other regulators” (Economist 2009: 1). As a result of free trade, “the volume of world merchandise trade at the start of the 21st century was about 17 times what it was in 1950, and the world's total output was not even six times as big” (ibid). Though free trade gives advantages to developed nations and businesses, it is somehow a destructive tool for developing countries and firms. Therefore, mercantilists oppose liberal trade and support the idea of limiting trade to make sure that a country or firm does not take advantages over another in a negative way. Though free trade has grown rapidly since 1950 and has been extremely beneficial to various states, “trade has another and more controversial effect,......

Words: 1297 - Pages: 6

Premium Essay

Us Tariff on Chinese Tariffs

...Ø 105% Tariffs on U.S. Chickens (2010) Ø Substitute Airbus for Boeing ? Summary of the Case: China’s Retaliation ARGUMENTS FOR : ARGUMENTS AGAINST: ECONOMIC: •  Protect the U.S. from unfair competition brought in by China •  Protect tire industry workers in the U.S. •  Stop dumping caused by low cost producers- China ECONOMIC: •  Inflict economic damage on both countries •  Loss of economic welfare (in the U.S.) Ø  Higher prices Ø  Lower consumer choice •  Trade war POLITICAL REASONING : •  One of the key reasons President Obama backed up the International Trade Commission was to keep the American labour unions content and gain their support during the elections. •  Expected outcome of the protectionism policy applied Ø  Predicted increase of 1,200 jobs on the tire-manufacturing sector Ø  Theoretical expectation •  Actual outcome on consumers Ø  Higher prices for consumers q  Prices of Chinese tire imports faced a 26% increase •  Actual outcome on the labour market Ø  President Obama “over a thousand Americans are working today because we stopped a surge in Chinese tires.” Ø  Vic Delorio “ This decision will...

Words: 683 - Pages: 3

Premium Essay

Adam Smith

...Why Adam Smith is important Adam Smith (1723-1790) was a Scottish philosopher and economist who is best known as the author of An Inquiry into the Nature and Causes of the Wealth Of Nations (1776), one of the most influential books ever written. The old view of economics In Smith’s day, people saw national wealth in terms of a country’s stock of gold and silver. Importing goods from abroad was seen as damaging because it meant that this wealth must be given up to pay for them; exporting goods was seen as good because these precious metals came back. So countries maintained a vast network of controls to prevent this metal wealth draining out – taxes on imports, subsidies to exporters, and protection for domestic industries. The same protectionism ruled at home too. Cities prevented artisans from other towns moving in to ply their trade; manufacturers and merchants petitioned the king for protective monopolies; labour-saving devices were banned as a threat to existing producers. The productivity of free exchange Smith showed that this vast ‘mercantilist’ edifice was folly. He argued that in a free exchange, both sides became better off. Quite simply, nobody would trade if they expected to lose from it. The buyer profits, just as the seller does. Imports are just as valuable to us as our exports are to others. Because trade benefits both sides, said Smith, it increases our prosperity just as surely as do agriculture or manufacture. A nation’s wealth is not the quantity of......

Words: 320 - Pages: 2

Free Essay

‘a Still Growing but More Complex China’: Current Opportunities and Challenges for Mncs in China

...overview of China today Relationship of China and world MNCs ‘A still growing but more complex China’ Impact of global financial crisis on the relationship China in the ranking of MNCs wish-list What does today’s China hold for MNCs 2 ‘A still growing but more complex China’: Current opportunities and challenges for MNCs in China 2. Challenges for MNCs as they expand their footprint in the world’s second largest economy “Not ‘Cheap China’ any more: costs are soaring across China Business Challenges Labor shortages; due to China’s aging problem Wage inflation; country’s ageing population has changed the cost equation abruptly Conducting Regulatory successful Challenges Rise of trade protectionism Local competitors are becoming more competitive business in the world’s 2nd largest economy is increasingly Regional ‘There is more than one China’ Differences challenging Rising consumption Selling to China’s middle-class isn’t always easy Explosive growth in both desire and purchasing power China’s middle class Consumption patterns can change overnight 3 ‘A still growing but more complex China’: Current opportunities and challenges for MNCs in China 3. Opportunities for MNCs to operate in China Favorable tax treatment to foreign invested companies VAT...

Words: 379 - Pages: 2

Free Essay

International Policy

...INTERNATIONAL POLICY IMPLICATIONS FOR CHILD LABOUR IN INDIA. INTRODUCTION • According to the International Labour Office, any activity other than study or play, remunerated or unremunerated, carried out by a person under the age of 15 years is defined as child labour. • 90 % of the total child employment is concentrated in Asia & Africa, with more than 44 million child labourers in India alone. REVIEW OF LITERATURE • Economic Impact of child labour- a) Micro family level- Short run effect on house hold income, long run effect on house hold poverty through human capital. b) Macro variables- Long run growth & development, FDI & Labour market. • Forms of Child Labour- a) Hazardous and non-hazardous activities b) Agricultural and non-agricultural work c) Jobs in the modern and traditional industries d) Economic and non-economic activities e) wage earners and unpaid family workers • Effect of Child Labour- a) Loss of human capital. b) Slows down technological progress. c) Health problem. • Causes of Child Labour- a) Lack of enforcement of minimum age requirement (confusion regarding description of age limit of child) b) Poverty & schooling problem (inaccessibility of school & lack of quality education). c) Rigid cultural & social role limiting educational attainment. d) Acceptance of social class separation.(lower castes expected to perfirm manual......

Words: 602 - Pages: 3