What Is Protectionism?

Protectionism refers to government policies that restrict international trade to help domestic industries. Protectionist policies are🧸 usually implemented with the goal of improving economic activity within a domestic economy but can also be implemented for safety or quality concerns.

Understanding Protectionism

Protectionist policies are typically focused on imports but may also involve other aspects of international trade, such as product standards and government 澳洲幸运5开奖号码历史查询:subsidies.

The merits of protectionism are the subject of fierce debate. Critics argue that over the long term, protectionism often hurts the people and entities it is intended to protect by slowing economic growth and increasing price inflation, making 澳洲幸运5开奖号码历史查询:free trade a better alternative. Proponents of protectionism argue that the policies can help to create domestic jobs, increase 澳洲幸运5开奖号码历史查询:gross domestic product (GDP), and make a dom🎉estꦇic economy more competitive globally.

Types of Protectionist Tools

Tariffs

Import tariffs are one of the top tools that a government uses when seeking to enact protectionist policies. There are three main 澳洲幸运5开奖号码历史查询:countervailing import tariff concepts that can be theorized for protective measures. In general, all forms of import tari🅺ffs are charged to the importing country and d🔯ocumented at government customs. Import tariffs raise the price of imports for a country.

Scientific tariffs are import ta🧸riffs imposed on an item-by-item basis, raising the price of goods for the importer and passing on higher prices to the end buyer. Peril point import tariffs are focused on a specific industry.

These tariffs involve the calculation of the levels at which point tariff decreases or increases would cause significant harm to an industry overall, potentially leading to the jeopardy of closure due to an inability to compete. Retaliato🌼ry tariffs are tariffs ena🐠cted primarily as a response to excessive duties being charged by trading partners.

Import Quotas

Import quotas are 澳洲幸运5开奖号码历史查询:nontariff barriers put in place to limit the number of products that can be imported over a set period of time. The purpose of quotas is to limit the supply of specified products provided by an exporter to an importer. This is typically a le🎀ss drastic action that has a marginal effect on prices and leads to higher demand for domestic businesses to cover the shortfall.

Quotas may also be put in place to prevent dumping, which occurs when foreign producers export products at prices lower than production costs. An embargo, in wh🌼ich the importation of designated products is completely prohibited, is the most severe type of quota.

Product Standards

Product safety and low-quality prod𒆙ucts or materials are typically top concerns when enacting pꦰroduct standards. Product standard protectionism can be a barrier that limits imports based on a country’s internal controls.

Some countries may have lower regulatory standards in the areas of food preparation, 澳洲幸运5开奖号码历史查询:intellectual property enforcement, or materials production. This can lead to a produ𒅌ct standard requirement or a blockage of certain imports due to regulat🌳ory enforcement. Overall, restricting imports through the implementation of product standards can often lead to a higher volume of production domestically.

For example, consider French cheeses made with raw instead of pasteurized milk, which must be aged for at least 60 days before being imported to the United States. Because the process for producing many French cheeses involves aging for 50 days or less, some of the most popular French cheeses are banned from the U.S., providing an advantage for U.S. producers.

Government Subsidies

Government subsidies can come in various forms. Generally, they may be direct or indirect. Direct subsidies♍ provide businesses with cash payments. Indirect subsidies come in the form of special savings such as interest-free loans and tax breaks.

When exploring subsidies, government officials may choosꦍe to provide direct or indirect subsidies in the areas of production, employment, tax, property, and more.

When s✃eeking to boost a country’s balance of🌼 trade, a country might also choose to offer subsidies to businesses for exports. Export subsidies provide an incentive for domestic businesses to expand globally by increasing their exports internationally.

The Bottom Line

By implementing protectio🔯nist policies, such as quotas and tariffs, governments seek to protect domestic businesses from foreign competition. While this can help domestic busines𒊎ses, it can hurt consumers in the form of higher prices. It can also lead to tense political relations between nations.