Reasons for protectionism

• What is the purpose of nations protecting their economies?

  To protect industries from imports
• What is a tariff?

  A tax on imports
• What is a quota?

  A quantity limit on imports
• What is an embargo?

  A ban on imports
• What do subsidies do?

  Lower the cost of production
• What is the purpose of subsidies?

  To help domestic producers compete internationally
• What does protectionism restrict?

  Free trade between nations
• According to the infant industry argument, why might a government impose tariffs?

  To allow domestic firms to grow
• What is the aim of protecting infant industries?

  To allow development of economies of scale
• Why is the infant industry argument considered weak?

  It can lead to inefficiency
• What is dumping?

  Selling goods below costs of production
• What might cause a country to dump goods?

  Excess subsidies
• Why might a government retaliate against dumping?

  To protect domestic industries
• Why is dumping hard to prove?

  It is difficult to determine production costs
• What is a better alternative to protectionism in response to dumping?

  Trade talks
• Why might a government adopt protectionist measures to protect domestic employment?

  To prevent structural unemployment
• What is an argument against protecting industries to save jobs?

  It delays inevitable decline
• Why might a nation use protectionist measures against countries with low-cost labor?

  To create a level playing field
• What is the purpose of strict product safety standards as protectionist measures?

  To protect against poor quality goods
• For developing countries, why is raising government revenue a big argument for tariffs?

  To fund public goods
• Why are import tariffs easy for developing countries to collect?

  Because they are imposed at borders
• What is a possible reason for protectionism related to the current account?

  To improve a current account deficit
• Why is using protectionism to improve the current account a weak argument?

  It can lead to retaliation
• How can protectionism help avoid over-specialization?

  By allowing diversification of industries
• What is the risk of over-specialization?

  Reliance on a single industry