3. Protectionism
Protectionism is the trade
measures or economic
policy imposed by countries’
governments to protect their
domestic businesses and
industries from foreign
competition.
The use of trade
barriers to protect
industries from
foreign competition.
Where politics,
foreign policy and
(occasionally)
rational economic
debate collide
4. Protectionism includes government policies
that restrict free trade between particular
countries, seeking to protect the local industries
and jobs from unfair foreign competition. The
most common types of protectionism measures
are tariffs, import quotas, and subsidies to local
producers.
Trade protectionism is a type of policy that
limits unfair competition from foreign
industries. It's a politically motivated
defensive measure. In the short run, it
works. But it is very destructive in the long
term. It makes the country and its
industries less competitive in international
commerce.
6. A tariff is a tax on imports, which can
either be specific or ad valorem .Tariffs
reduce supply and raise the price of
imports. This gives domestic equivalents
a comparative advantage. As such,
tariffs are distorting the market forces
and may prevent consumers from
gaining the benefit of all the advantages
of international specialisation and trade.
Tariffs
7. Quotas
Quotas have the effect of
restricting the maximum
amount of imports allowed into
an economy. Once again, they
reduce the amount of imports
entering an economy and
increase the equilibrium price
within the market. The
government receives no
revenue from a quota, as it
does with a tariff, unless it can
set up a system of licences.
8. The government could limit the amount
of foreign currency available for paying
for imports. These are not allowed
amongst member states of the
European Union (EU), for example, and
have become more difficult to sustain in
a world of highly mobile capital.
Exchange
controls
9. Export
subsidies
The government could limit the
amount of foreign currency
available for paying for
imports. These are not allowed
amongst member states of the
European Union (EU), for
example, and have become
more difficult to sustain in a
world of highly mobile capital.
10. Some quotas are voluntarily agreed
between countries. This happened on
a significant number of occasions
with Japanese firms during the
1990s. Where the quotas have been
agreed, they are known as Voluntary
Export Restraints . In fact over 200
VER's were in force in the early
1990s.
Voluntary
export
restraints
(VER's)
11. The impact of protectionism
on international trade:
The world has been transformed since China opened up in
1990. Never in human history have so many people been lifted
out of poverty in such a short time – more than one billion by
2010 and hundreds of millions more since. Nor is it hard to
know why. The high octane fuel powering the global economy to
these new peaks was the transformation brought about by
international supply chains.
But in any revolution there are losers as well as winners and
now the world has to learn how to accommodate the backlash.
The election in the United States of Donald Trump, the vote for
Brexit in the UK and the surge in support for economic
nationalism across Europe have given a voice to those who feel
left behind. The representatives of the discontented now have
their hands on the levers of power.
12. And in the protectionist stance of President Trump with his
tearing up of the Trans-Pacific trade treaty, the threats against
Mexico and China, the promise to bring jobs back to the United
States, the belligerent proclamation of America first, comes the
first serious challenge to the new globalised order.
People may think the clock cannot be turned back. But that is
not the lesson of history. Globalisation was the dominant
achievement of the late-Victorians, yet the great power rivalries
it engendered led to its destruction in the conflict of the First
World War.
However, there are also reasons for hope if only because the
world is already so deeply entwined.
13. 9 Reasons for Protectionism
Protecting the infant industry
Protecting jobs
Revenue
National security
Protect consumers from unsafe products
Discourage unethical practices
Protection from dumping
Narrowing BOP deficit
Cultural preservation
14. To safeguard domestic employment
To correct balance of payments disequilibrium
To prevent labour exploitation in developing economies
To prevent dumping
To safeguard infant industries
To enable a developing country to diversify
Source of government revenue
Strategic arguments
15. Arguments against
Protectionism In
International Trade
1. Encouragement to inefficient
Industries
2. Low Economic Utilization of Natural
Resources
3. Creation of Monopoly
4. Production as a claim
5. Loss to Consumers
6. Inequality in the Distribution of
National Income
7. Reduced Volume of Foreign Trade
8. Political Corruption
9. Strained Foreign Relations
16. “
Advantages
If a country is trying to grow strong in a new
industry, tariffs will protect it from foreign
competitors. That gives the new industry’s
companies time to develop their own competitive
advantages.
Protectionism also temporarily creates jobs for
domestic workers. The protection of tariffs, quotas
or subsidies allows domestic companies to hire
locally.
This benefit ends once other countries retaliate by
erecting their own protectionism.
17. Disadvantages
In the long term, trade protectionism weakens the industry. Without
competition, companies within the industry have no need to innovate.
There's no need to. Eventually, the domestic product will decline in
quality. It will be lower quality and more expensive than what foreign
competitors produce.
Job outsourcing is a result of declining U.S. competitiveness.
Competition has declined from decades of the United States not
investing in education. This is particularly true for high-tech,
engineering and science. Increased trade opens new markets for
businesses to sell their products. The Peterson Institute for
International Economics estimates that ending all trade barriers would
increase U.S. income by $500 billion.
Increasing U.S. protectionism will further slow economic growth. It
would cause more layoffs, not fewer. If the United States closes its
borders, other countries will do the same. This could cause layoffs
among the 12 million U.S. workers who owe their jobs to exports.
