key term - Protectionist

Definition

Protectionism refers to government policies and actions that restrict or limit international trade in order to protect domestic industries and jobs from foreign competition. Protectionist measures aim to make imported goods less attractive to consumers compared to domestically produced goods.

5 Must Know Facts For Your Next Test

1. Protectionist policies are often justified by governments as a way to save domestic jobs and support local industries.
2. Tariffs and non-tariff barriers are two of the most common protectionist measures used to restrict imports.
3. The infant industry argument is a rationale for temporary protectionism to allow new domestic industries to develop and become competitive.
4. Protectionist policies can lead to retaliatory actions from trading partners, potentially triggering trade wars.
5. Consumers often pay higher prices for goods due to protectionist measures, which can reduce their purchasing power.

Review Questions

• Explain how protectionist policies aim to benefit domestic industries and workers.
  • Protectionist policies, such as tariffs and non-tariff barriers, are intended to make imported goods more expensive and less attractive to consumers compared to domestically produced goods. This helps protect domestic industries from foreign competition, allowing them to maintain or increase their market share and profitability. The goal is to save domestic jobs and support local industries, particularly those that are new or struggling to compete internationally.
• Describe the potential consequences of protectionist measures on international trade and the broader economy.
  • Protectionist policies can lead to retaliatory actions from trading partners, potentially triggering trade wars that disrupt global supply chains and reduce economic growth. Additionally, consumers often pay higher prices for goods due to protectionist measures, which can reduce their purchasing power and standard of living. Protectionism can also limit access to a wider range of products and reduce competition, potentially leading to less innovation and efficiency in the long run.
• Evaluate the merits and drawbacks of the infant industry argument as a justification for temporary protectionism.
  • The infant industry argument suggests that new or emerging domestic industries should be temporarily protected from foreign competition to allow them to grow and become internationally competitive. The potential benefit is that it gives these industries time to develop and improve their efficiency, potentially leading to long-term economic benefits. However, the drawbacks include the risk of protectionist measures becoming entrenched, the potential for misallocation of resources, and the higher costs passed on to consumers. Ultimately, the effectiveness of the infant industry argument depends on the specific industries, the duration of protection, and the ability of the government to phase out the protectionist measures once the industries have matured.

Related terms

Tariff: A tax or duty imposed on imported goods, making them more expensive and less competitive compared to domestic products.

Non-Tariff Barriers:

Regulations, quotas, or other policies that restrict or impede the flow of imports without directly imposing a tariff.

Infant Industry Argument: The idea that new or emerging domestic industries should be temporarily protected from foreign competition to allow them to grow and become internationally competitive.