4.1.6 Restrictions on Free Trade Flashcards
(29 cards)
What is protectionism?
A set of government policies designed to limit international trade in order to protect domestic industries from international competition.
What are reasons for the implementation of protectionism? (6)
- Infant Industry Protection
- Dumping
- Job Protection
- Protecting Standards
- Raising Government Revenue
- Correcting BoP Deficit
What is Infant Industry Protection?
Helping new industries to grow before they face full competition.
What is dumping?
When foreign companies sell products below their production cost in the domestic market, harming domestic producers.
How does protectionism protect jobs?
It prevents job loss from competition in key sectors.
How does protectionism protect standards?
It blocks harmful or unsafe foreign products.
How does protectionism raise government revenue?
Tariffs can collect money for public services.
How does protectionism correct the BoP deficit?
It can tackle trade imbalance by reducing imports.
What is a tariff?
A tax placed on imported goods which makes them more expensive to consumers and helps protect domestic producers.
Why do governments use tariffs? (3)
- Protect new/struggling industries
- Higher government revenue
- Correct the BoP
What is one of the key effects of an import tariff on a market?
Raises prices, reduces imports, created dead-weight welfare loss
What is a quota?
A physical limit on the quantity of a good that can be imported into a country.
Why do governments use quotas? (3)
- Protect domestic firms
- Control the BoP
- Support politically sensitive/culturally significant sectors
What is a subsidy in terms of protectionism?
A payment from the government to domestic firms to lower their production costs and help them compete with foreign imports.
What are reasons for the use of a protectionist subsidy? (4)
- Protect jobs
- Support strategic industries
- Improve competitiveness
- Reduce reliance on imports
How does a protectionist subsidy support strategic industries?
They can focus on vital areas like energy, agriculture or technology for national interest.
How does a protectionist subsidy improve competitiveness?
Lowers production costs so firms can sell abroad and domestically.
How does a protectionist subsidy reduce reliance on imports?
It makes the country less vulnerable to global supply shocks.
What are non-tariff barriers?
Trade restrictions based on rules, regulation or standards, rather than tariffs or quotas.
Why are non-tariff barriers used? (4)
- Protect health and safety
- Hidden retaliation
- Protecting domestic agriculture
- Environmental standards
What are the negative impacts of protectionism on consumers? (3)
- Higher price
- Lower choice
- Lower consumer surplus
What are the positive impacts of protectionism on producers? (2)
- Protection against competition
- Increased market share
What are the negative impacts of protectionism on producers? (2)
- Lower incentive to improve and innovate
- Higher risk of inefficiency
What are the positive impacts of protectionism on the government? (1)
- Higher government revenue
