6.2 Protectionism Flashcards
(20 cards)
What is protectionism?
Government policies that restrict international trade to protect domestic industries from foreign competition.
Why might a country use protectionist policies?
To support infant industries, reduce unemployment, or protect national security sectors.
What is a tariff?
A tax imposed on imported goods to make them more expensive than domestic products.
How do tariffs affect import levels?
They reduce demand for imports by raising their price.
How do tariffs impact domestic producers?
They gain market share due to reduced foreign competition.
What is a government benefit of tariffs?
Tariffs generate revenue for the government.
What is a common international reaction to tariffs?
Retaliation, possibly leading to a trade war.
What is an import quota?
A physical limit on the quantity of a good that can be imported.
What is an export subsidy?
A payment from the government to encourage domestic firms to export more.
How do export subsidies affect the price of exports?
They allow firms to lower prices, increasing competitiveness.
What is a trade embargo?
A total ban on trade with a particular country or of a particular good.
What’s a major downside of embargoes?
They can hurt the domestic economy and limit access to needed goods.
What is meant by administrative protectionism or “red tape”?
Using complex regulations to deliberately slow or block imports.
Give an example of “red tape” in trade.
Excessive safety standards, customs delays, or complex licensing procedures.
What is the infant industry argument?
New industries need protection until they become internationally competitive.
How can protectionism help with the balance of payments?
It reduces imports, improving the current account.
What’s the employment argument for protectionism?
It protects domestic jobs from foreign competition.
How might protectionism reduce dumping?
By placing barriers against unfairly cheap foreign imports.
What is a long-term downside of subsidies?
They can create dependence and are often financially unsustainable.
How does protectionism reduce efficiency?
It shelters inefficient firms, reducing competition and innovation.
