Protectionism

Question 1

what is protectionism?

Answer 1

creating barriers to trade

Question 2

what are the 3 types of protectionism?

Answer 2

tariffs = tax on imports
quotas = limiting the number of imports that can enter a country
subsidies = for domestic firms

Question 3

why trade?

Answer 3

to protect the entire economy
- difficult to compete with low cost NEE’s (Chindia)
- can lead to international structural unemployment
to protect specific industries
- strategic
- sunrise (need the chance to grow and gain economies)
- sunset (declining industries)

Question 4

the problem with protectionism

Answer 4

• tit for tat retaliation = other countries may also implement protectionist measures
• tariffs and quotas restrict output and raise prices
• can lead to imported inflation

Question 5

what may be a better solution?

Answer 5

supply side policies