4.1.4 Protectionism

• Infrastructure is roads,buildings,railways and electricity etc
• Indigenous means native to a place
• Businesses face a number of problems when exporting goods

  1. Consumer remoteness and a lack of knowledge of overseas markets
  2. Different languages and cultures
  3. Supplying a suitable product i.e different safety standards
  4. Import regulations i.e tarrifs
  5. Fluctuations in exchange rate
• (EU) European Union countries- High wage rates. Developed indigenous industries.

  Free trade. AND Eastern Europe – Middle income. Developed infrastructure and

  skilled workforce. Some industry.
• (W) Western Economies - High wage rates. Developed indigenous

  industries. Protectionism, tariff barriers, particularly high in countries such as Japan.
• (D) Developing nations – Middle income. Developing industry, particularly in low tech areas. Developing infrastructure.
• (A) African - Low wage rates. Little domestic industry. Tariff barriers. Poor

  infrastructure.
• (SEA) South East Asian – Middle income – High tariff. Developing industry.

  Reasonably good infrastructure.
• (AS) Asian – Low income. High Tariff. Little indigenous industry.

  (Japan and South Korea are rich) (China has lots of developing industries)
• (O) Oil Producers – High income. Little indigenous industry. Low tariff barriers.
• Methods of selling goods abroad

  Direct sales from UK

  Online

  Overseas agent

  Overseas subsidiaries
• Direct sales from the UK – involve running and exports sales department and

  sending representatives abroad to meet foreign buyers directly.
• Overseas agent – these are appointed (generally on a commission basis) to sell the

  goods on the firms behalf.
• Overseas subsidiaries – instead of exporting a firm may decide to set up a factory

  overseas. This may e to manufacture the whole product, assemble a product or

  merely a sales outlet to market and sell the product.
• Direct sales from UK

  advantages - get to keep all profit

  disadvantages - don't know the language/markets,difficult and expensive if sending people overseas

  Online

  a - easy and cheap

  d - poor relationships with customers
• Overseas agent

  a - know all markets and culture and language,incentive to sell (commission)

  d - pay percentage to them
• Overseas subsidiaries

  a - avoid transport costs,tariffs and exchange rates should be cheaper

  d - expensive to start,don't know market,can often be distracting from main business.
• Protectionist measures are measures that a country uses to protect its own industry from foreign competition. This is often done to keep domestic firms open in a country and protect jobs. There are various forms of protectionism:

  Tariff

  Import Quota

  Government Legislation – including products standards, joint ventures

  Domestic Subsidies

  Keeping a currency artificially low
• Tariff barriers are taxes added when goods are imported from abroad that means the selling price for consumers will increase so they are more likely to buy goods from local businesses rather than abroad.
• The two main reasons a country would impose a tariff barrier would be to protect domestic businesses and jobs and to raise money for the government.
• The company who made the good and the local consumer will be the ones to loose out when a tariff barrier is introduced.
• An Import Quota is when a physical limit is put on the number of imports that can

  come in from a particular country. For example India might state that a maximum of

  50,000 cars from Japan can be imported per year.
• The implications of an import quota on consumers is that the good will be more expensive and have less choice
• An export subsidy,for example is The Chinese government pay for electricity for Chinese firms that are producing steel meaning they have lower costs than other markets in the world,therefore they can sell steel cheaper and out compete Britain and America
• If a foreign firm wanted to set up in India or China they would have to set up as a joint venture,this is where they would have to join with a local business.

  This is done to help local businesses grow and protect them and stop foreign firms taking over.