Types of protectionism

• What is the main goal of protectionist policies?

  To protect domestic firms from foreign competition
• According to the definition, what are the two key aspects of protectionist policies?

  Barriers to trade and protecting domestic firms
• What is the most common type of protectionism used globally?

  A tariff
• What is a tariff?

  A tax on imports
• What effect does a tariff have on the price of imports?

  Raises the price
• What is a quota?

  A quantity limit on imports
• How does a quota affect domestic demand and the price of imports?

  Creates excess demand and increases the price
• What is an embargo?

  An outright ban on imports
• In what situations are embargos often implemented?

  Political reasons, war, conflict, human rights issues
• What effect do domestic subsidies have on the cost of production for domestic firms?

  Lowers the cost of production
• What is the purpose of domestic subsidies?

  To encourage firms to increase output
• How do governments or central banks devalue exchange rates?

  By intervening in foreign exchange markets
• How does exchange rate devaluation assist domestic producers?

  Gives them cheaper exports
• What is the definition of red tape in the context of trade?

  Mountains of paperwork and bureaucracy
• Why can red tape act as a barrier to imports?

  The costs and effort may be too severe
• How can imposing higher standards or regulations act as a barrier to imports?

  Makes it harder for foreign producers to meet them
• What types of standards or regulations might countries impose to create barriers to trade?

  Product safety, health and safety, worker, environmental
• What must foreign producers do to sell goods when standards or regulations are imposed?

  Prove they're meeting those standards
• According to the text, which type of protectionism is the most common?

  Tariffs