4.1 Protectionism Flashcards
(12 cards)
what is free (open) trade?
an economic policy of not discriminating against imports and exports to and from other countries.
trade is possible without any tariffs, quotas, subsidies or prohibitions on goods and services
what are some benefits of free trade?
- countries can benefit from comparative advantage
- businesses can better achieve economies of scale
- enables businesses to grow beyond their domestic borders
what is the world trade organisation (WTO)
the WTO is the only international organisation that deals with the global rules of trade between nations.
what is the main function of the world trade organisation (wto)?
to ensure that trade flows smoothly, predictably and as freely as possible
what is protectionism?
any attempt by a country to impose restrictions on trade in goods and services.
what is the main aim of protectionism?
to cushion domestic businesses and industries from the overseas competition
what are the 3 main kinds of protectionism?
- import quotas
- tariffs
- domestic and export subsidies
what is a tariff?
a tariff is a tax or duty that raises the price of imported products and causes a reduction in domestic demand and and expansion in domestic supply.
what is an import quota?
quotas are volume limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given time.
what is a subsidy?
a payment to encourage domestic production by lowering a businesses costs
what are the key arguments in favour of protectionism?
- helps infant industries establish them-self, including achieving economies of scale
- protects jobs, skills and capabilities in key industries to a country
- protects against import dumping (a form of predatory pricing)
what are the key arguments against protectionism?
- higher prices for consumers
- retaliation from other counties - like price wars
- extra costs for exporters
