Economics
Protectionism
Protectionism refers to government policies and actions that restrict international trade, often through tariffs, quotas, and other barriers. The aim is to protect domestic industries from foreign competition and to safeguard jobs and economic interests within the country. While protectionism can provide short-term benefits for certain industries, it can also lead to higher prices for consumers and retaliation from trading partners.
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10 Key excerpts on "Protectionism"
eBook - PDF- Owen E. Hughes, Deirdre O'Neill(Authors)
- 2008(Publication Date)
- Red Globe Press(Publisher)
Free-trade economists see protection as a distortion of the free market and regard those wanting industry protection as rent-seekers. But the various forms of protection should really be seen as political instruments, carried out in response to political pres-sures. Protectionism cannot be explained away as simply the resul-tant of political forces — much protection can only be regarded as bad policy — but it can be understood when one takes account of the political economy at work. Free trade and Protectionism are not solely matters of economics; they are also matters of politics. The current status of the long argument between the proponents of free trade and those who advocate Protectionism is somewhat uncertain. The sixty years after World War II was a period of genuine reductions in protection around the world and particularly in the more developed nations. The GATT and later the WTO and other multilateral bodies have presided over this freeing up of Protectionism 169 trade. And yet, Protectionism never goes away. The earlier strong support for free trade in the United States seems to be evaporating as the Congress debates various protectionist measures. Japan and Europe have been consistently more inclined to protect industry and if other countries moved towards Protectionism they would follow with alacrity. Protectionism defined Protectionism is the practice of employing economic devices to restrict or distort trade and to benefit domestic producers. There are numerous forms of protection, notably tariffs, import quotas and other non-tariff barriers, such as preferential procurement arrange-ments and export taxes. These are described in more detail below. Tariffs A tariff is a customs duty on imports – a percentage added to the value of certain classes of goods that the importer pays as a tax to the government. The price that can be charged for an imported good is increased as a result, thereby allowing domestic production to be more competitive with imports.
eBook - PDF- David Shapiro, Daniel MacDonald, Steven A. Greenlaw(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 21.1 Protectionism: An Indirect Subsidy from Consumers to Producers LEARNING OBJECTIVES By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes that governments impose on imported goods and services. This makes imports more expensive for consumers, discouraging imports. For example, in 2018, President Trump increased tariffs on Chinese-manufactured goods by 2–25%, including TVs, monitors, desktop PCs, smartwatches, and many other consumer goods. The intention behind the policy was to shelter U.S. manufacturers from competition, helping companies that operate domestically. China responded with tariffs on American goods, launching a trade war. President Biden retained these tariffs and considered additional ones, but as of August 2022, the administration was considering changes designed to reduce inflation.
eBook - PDF- Steven A. Greenlaw, Timothy Taylor, David Shapiro(Authors)
- 2017(Publication Date)
- Openstax(Publisher)
On a different tack, some environmentalists worry that multinational firms may evade environmental protection laws by moving their production to countries with loose or nonexistent pollution standards, trading a clean environment for jobs. Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 21.1 | Protectionism: An Indirect Subsidy from Consumers to Producers By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes that governments impose on imported goods and services. This makes imports more expensive for consumers, discouraging imports. For example, in recent years large, flat- screen televisions imported to the U.S. from China have faced a 5% tariff rate. Another way to control trade is through import quotas, which are numerical limitations on the quantity of products that a country can import. For instance, during the early 1980s, the Reagan Administration imposed a quota on the import of Japanese automobiles.
eBook - PDF- Steven A. Greenlaw, Timothy Taylor, David Shapiro(Authors)
- 2017(Publication Date)
- Openstax(Publisher)
On a different tack, some environmentalists worry that multinational firms may evade environmental protection laws by moving their production to countries with loose or nonexistent pollution standards, trading a clean environment for jobs. Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 20.1 | Protectionism: An Indirect Subsidy from Consumers to Producers By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes that governments impose on imported goods and services. This makes imports more expensive for consumers, discouraging imports. For example, in recent years large, flat- screen televisions imported to the U.S. from China have faced a 5% tariff rate. Another way to control trade is through import quotas, which are numerical limitations on the quantity of products that a country can import. For instance, during the early 1980s, the Reagan Administration imposed a quota on the import of Japanese automobiles.
eBook - PDF- Steven A. Greenlaw, David Shapiro, Daniel MacDonald(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 34.1 Protectionism: An Indirect Subsidy from Consumers to Producers LEARNING OBJECTIVES By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes that governments impose on imported goods and services. This makes imports more expensive for consumers, discouraging imports. For example, in 2018, President Trump increased tariffs on Chinese-manufactured goods by 2–25%, including TVs, monitors, desktop PCs, smartwatches, and many other consumer goods. The intention behind the policy was to shelter U.S. manufacturers from competition, helping companies that operate domestically. China responded with tariffs on American goods, launching a trade war. President Biden retained these tariffs and considered additional ones, but as of August 2022, the administration was considering changes designed to reduce inflation.
eBook - PDF- Steven A. Greenlaw, Timothy Taylor(Authors)
- 2014(Publication Date)
- Openstax(Publisher)
On a different tack, some environmentalists worry that multinational firms may evade environmental protection laws by moving their production to countries with loose or nonexistent pollution standards, trading a clean environment for jobs. Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 21.1 | Protectionism: An Indirect Subsidy from Consumers to Producers By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes imposed on imported goods and services. They make imports more expensive for consumers, discouraging imports. For example, in recent years large, flat-screen televisions imported from China have faced a 5% tariff rate. Another way to control trade is through import quotas, which are numerical limitations on the quantity of products that can be imported. For instance, during the early 1980s, the Reagan Administration imposed a quota on the import of Japanese automobiles.
eBook - PDF- Steven A. Greenlaw, Timothy Taylor(Authors)
- 2015(Publication Date)
- Openstax(Publisher)
On a different tack, some environmentalists worry that multinational firms may evade environmental protection laws by moving their production to countries with loose or nonexistent pollution standards, trading a clean environment for jobs. Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 20.1 | Protectionism: An Indirect Subsidy from Consumers to Producers By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes imposed on imported goods and services. They make imports more expensive for consumers, discouraging imports. For example, in recent years large, flat-screen televisions imported from China have faced a 5% tariff rate. Another way to control trade is through import quotas, which are numerical limitations on the quantity of products that can be imported. For instance, during the early 1980s, the Reagan Administration imposed a quota on the import of Japanese automobiles.
eBook - PDF- Steven A. Greenlaw, Timothy Taylor, David Shapiro(Authors)
- 2017(Publication Date)
- Openstax(Publisher)
On a different tack, some environmentalists worry that multinational firms may evade environmental protection laws by moving their production to countries with loose or nonexistent pollution standards, trading a clean environment for jobs. Some politicians worry that their country may become overly dependent on key imported products, like oil, which in a time of war could threaten national security. All of these fears influence governments to reach the same basic policy conclusion: to protect national interests, whether businesses, jobs, or security, imports of foreign products should be restricted. This chapter analyzes such arguments. First, however, it is essential to learn a few key concepts and understand how the demand and supply model applies to international trade. 34.1 | Protectionism: An Indirect Subsidy from Consumers to Producers By the end of this section, you will be able to: • Explain Protectionism and its three main forms • Analyze Protectionism through concepts of demand and supply, noting its effects on equilibrium • Calculate the effects of trade barriers When a government legislates policies to reduce or block international trade it is engaging in Protectionism. Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers. Recall from International Trade that tariffs are taxes that governments impose on imported goods and services. This makes imports more expensive for consumers, discouraging imports. For example, in recent years large, flat- screen televisions imported to the U.S. from China have faced a 5% tariff rate. Another way to control trade is through import quotas, which are numerical limitations on the quantity of products that a country can import. For instance, during the early 1980s, the Reagan Administration imposed a quota on the import of Japanese automobiles.
eBook - PDFMacroeconomics for Business
The Manager's Way of Understanding the Global Economy
- Lawrence S. Davidson, Andreas Hauskrecht, Jürgen von Hagen(Authors)
- 2020(Publication Date)
- Cambridge University Press(Publisher)
• Wolf notes that while developing countries will gain by having more access to other countries, the largest improvements will come from their own liberalization. • Wolf points out that multinational companies generally have not exploited local workers – in fact his evidence shows that they pay the workers more and treat them better than local firms. • Some critics worry that when firms and jobs leave the US for foreign countries or when US firms outsource, this leads to lower wages in the US; Wolf counters that the US is a major recipient of inbound capital investment and insourcing. This tends to balance the impacts on employment and wages. 9.1.4 What Is Protectionism? Protectionism is anything that creates a “protection” from the impact of inter- national competition. One very interesting aspect of Protectionism is that it usually bestows large benefits to a small number of firms that can be spread out as costs to a large number of households. That is interesting because it shows that the politics might favor the legislation or implementation of various kinds of Protectionism. Consider the vigor and enthusiasm and resources that local steel mills might have to devote to the passage of a high tariff on imported steel. These few companies might exert considerable pressure on government to obtain this end. Consider also that Macro Concepts and Analysis 283 while this tariff might increase the price of steel in the home country, the extra amount that each household or each voter might have to pay could be a few bucks – perhaps not even enough to notice. If government can convince the voters that the cost to each person is negligible and the gain to a local industry is worth millions of dollars and could save jobs – then the chances are it will be able to pass this legislation. This underscores how politics do not necessarily stand in the way of growing Protectionism.
eBook - PDF- Dominick Salvatore(Author)
- 2014(Publication Date)
- Wiley(Publisher)
One way to encourage the industry and confer greater external economies on society would be to restrict imports. But this also increases the price of the product to domestic consumers. A better policy would, again, be to provide a direct subsidy to the industry. Similarly, a direct tax would also Chapter Six Nontariff Trade Barriers and the Political Economy of Protectionism 147 be better than a tariff to discourage activities (such as automobile travel) that give rise to external diseconomies (pollution) because the tax does not distort relative prices and consumption. Trade restrictions are often advocated to protect domestic industries important for national defense. But even in this case, direct production subsidies are generally better than tariff protection. The closest we come to a truly valid economic argument for protection is the optimum tariff discussed in Section 5.7. That is, if a nation is large enough to affect its terms of trade, the nation can exploit its market power and improve its terms of trade and welfare with an optimum tariff. However, as we have seen, this is a beggar-thy-neighbor policy and other nations are likely to retaliate and lead to losses all around. It is clear that by increasing the commodity price, trade protection benefits producers and harms consumers (and usually the nation as a whole). However, since producers are few and stand to gain a great deal from protection, they have a strong incentive to lobby the government to adopt protectionist measures. On the other hand, since the losses are diffused among many consumers, each of whom loses very little from the protection, they are not likely to effectively organize to resist protectionist measures. Thus, there is a bias in favor of Protectionism. For example, the U.S. sugar quota raises individual expenditures on sugar by about $6 per person per year in the United States.
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