Protectionism

Definition

Protectionism is an economic policy aimed at shielding a country's domestic industries from foreign competition by imposing tariffs, quotas, and other trade barriers. This approach is often used by governments to encourage local production and preserve jobs, ultimately impacting trade relationships and economic growth.

5 Must Know Facts For Your Next Test

1. The National Policy was implemented in Canada in 1879, emphasizing protectionism to boost domestic manufacturing and economic growth.
2. Under protectionism, Canada imposed high tariffs on imported goods to protect its growing industries from competition with American products.
3. While protectionism aimed to foster Canadian businesses, it also led to tensions with trading partners, particularly the United States.
4. Supporters of protectionism argued that it was necessary for young industries to develop, while critics claimed it led to higher prices for consumers.
5. The impact of protectionism on Canada's economy can be seen in the growth of the manufacturing sector during the late 19th and early 20th centuries.

Review Questions

• How did protectionism influence the development of Canadian industries during the late 19th century?
  • Protectionism significantly influenced Canadian industries by providing a shield against foreign competition, particularly from American imports. By imposing high tariffs through the National Policy, the government encouraged consumers to purchase locally produced goods, allowing emerging industries to grow. This approach helped establish a more self-sufficient economy and laid the foundation for Canada's industrial development.
• What were some criticisms of protectionist policies in Canada during the implementation of the National Policy?
  • Critics of protectionist policies argued that such measures led to inflated prices for consumers, as high tariffs on imports reduced competition. They also believed that protectionism could foster inefficiency among domestic industries, leading to a lack of innovation and slower economic progress. Additionally, tensions with trading partners like the United States arose due to perceived unfair trade practices, which could have long-term implications for Canada's international relations.
• Evaluate the long-term effects of protectionism on Canada's economy and its relationship with global trade.
  • The long-term effects of protectionism on Canada's economy include both benefits and drawbacks. Initially, it helped develop a strong manufacturing sector and stimulated economic growth. However, as globalization increased, Canada faced pressure to adapt to international trade norms. This led to a gradual shift away from strict protectionist measures towards free trade agreements. The evolution from protectionism has shaped Canada's current role in global trade, balancing domestic interests with international partnerships.

Related terms

Tariffs: Taxes imposed on imported goods, making them more expensive and thus encouraging consumers to buy domestic products.

Trade Barriers: Government-imposed restrictions that limit international trade, including tariffs, quotas, and import licenses.

National Policy: A Canadian economic strategy introduced in the late 19th century aimed at promoting national industry through protectionist measures and infrastructure development.