Definition
Protectionism includes a range of economic policies aimed at restricting imports to protect domestic industries from foreign competition. Such policies may involve tariffs, import quotas, subsidies to local businesses, and stringent regulations on imported goods to make them less competitive than domestic products.
Protectionists are advocates of these policies, asserting that they help safeguard domestic employment, industry, and national security. Protectionist policies are often contrasted with free trade policies, which aim to reduce barriers to international trade.
Examples
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Tariffs on Steel and Aluminum: A government may impose tariffs on imported steel and aluminum to protect the domestic steel industry from cheaper foreign imports.
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Agricultural Subsidies: A country provides subsidies to its farmers to make their products cheaper than imported agricultural goods.
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Import Quotas on Automobiles: Setting a limit on the number of foreign cars that can be imported to protect the domestic automobile industry.
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Anti-Dumping Duties: Imposing duties on imports believed to be priced below market value to prevent foreign producers from undercutting domestic prices.
Frequently Asked Questions (FAQs)
What is the main goal of protectionism?
The primary goal of protectionism is to shield domestic industries from foreign competition, sustain local jobs, and support national economic growth by reducing reliance on foreign goods.
How do tariffs work in protectionism?
Tariffs are taxes imposed on imported goods, making them more expensive compared to domestic products. This price increase discourages imports and encourages consumers to buy local products.
Are there any negative effects of protectionism?
Protectionism can lead to trade wars, increase the price of goods for consumers, and result in inefficiencies as domestic industries may lack the pressure to innovate.
What is an import quota?
An import quota is a restriction that sets a physical limit on the quantity of a particular good that can be imported into a country within a specified time frame.
What are non-tariff barriers?
Non-tariff barriers include regulations, standards, and licenses that increase the difficulty and cost of importing goods without using tariffs.
Related Terms
- Tariff: A tax imposed on imported goods to make them more expensive and less attractive compared to domestic products.
- Quota: A limit on the amount of a certain product that can be imported or exported during a particular time period.
- Subsidy: Government financial support provided to domestic industries to help them compete against foreign imports.
- Dumping: The practice of exporting goods at prices lower than the home market or below the cost of production to gain market share.
- Free Trade: An economic policy that promotes unrestricted international trade by eliminating tariffs, quotas, and other trade barriers.
Online References
- Investopedia: Protectionism
- Economics Help: Protectionism - Definition, Pros, and Cons
- The Balance: What Is Protectionism?
Suggested Books for Further Study
- “Economics: Principles, Problems, and Policies” by Campbell R. McConnell, Stanley L. Brue, and Sean Masaki Flynn
- “Protectionism: The -isms that Don’t Work” by Donald J. Boudreaux
- “Free Trade under Fire” by Douglas A. Irwin
Fundamentals of Protectionism: Economics Basics Quiz
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