Protectionist measures

Definition

Protectionist measures are government policies designed to restrict international trade to protect domestic industries from foreign competition. These measures can include tariffs, import quotas, and subsidies, which aim to encourage local production and preserve jobs within the country. The significance of protectionist measures is evident in the ongoing debates about trade agreements and the influence of emerging economic powers on the global order.

5 Must Know Facts For Your Next Test

1. Protectionist measures can lead to trade wars between countries, as one nation may retaliate against tariffs or quotas imposed by another.
2. These measures are often used during economic downturns when countries seek to shield their economies from external shocks.
3. Protectionism can harm consumers by increasing prices and reducing the variety of available goods, leading to potential long-term negative economic effects.
4. Historically, protectionist measures have been linked to significant events like the Great Depression, where many countries adopted such policies, worsening global economic conditions.
5. Emerging economic powers often advocate for protectionist measures to nurture their local industries, impacting global trade dynamics and relationships.

Review Questions

• How do protectionist measures impact domestic industries and consumer choices?
  • Protectionist measures are aimed at bolstering domestic industries by shielding them from foreign competition. While this can help local businesses grow and preserve jobs, it often comes at the cost of higher prices for consumers and a reduced selection of products. By favoring local production, these measures can limit market competition, which might lead to inefficiencies and less innovation in the long run.
• Discuss the implications of protectionist measures in the context of global trade relationships.
  • The use of protectionist measures can strain global trade relationships as countries impose tariffs and quotas against each other. This leads to tensions and potential retaliation, creating a cycle of trade barriers that can escalate into full-blown trade wars. Such actions not only affect bilateral trade but can also disrupt broader multilateral agreements, making it difficult for nations to cooperate on shared economic interests.
• Evaluate the long-term effects of protectionist measures on emerging economic powers within the shifting global order.
  • Emerging economic powers often resort to protectionist measures to nurture their nascent industries, but these policies can have mixed long-term effects. While they may provide short-term benefits by fostering growth and stability, such measures can lead to retaliatory actions from other nations and hinder access to international markets. Additionally, over-reliance on protectionism may stifle innovation and competitiveness in the global arena, ultimately affecting their ability to assert influence in the shifting global order.

Related terms

Tariffs: Taxes imposed on imported goods, making them more expensive and less competitive compared to domestic products.

Import Quotas: Limits set by a government on the quantity of a specific product that can be imported during a given timeframe.

Subsidies: Financial support provided by the government to local businesses to lower their costs and make them more competitive against foreign imports.