Protectionism

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This revision presentation explains and illustrates the concept of protectionism. The presentation explains the factors that motivate protectionism and the methods employed, including tariffs, import duties, dumping, currency manipulation and the favouring of domestic firms and industries.

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Protectionism

  1. 1. Import Protectionism
  2. 2. Trade Barriers Transportation costs • Freight costs • Time costs • Customs Delays Policy barriers • Import Tariffs • Non-tariff barriers Internal trade and transaction costs • Information costs • Contract enforcement costs • Red tape
  3. 3. Trade Barriers Transportation costs • Freight costs • Time costs • Customs Delays Policy barriers • Import Tariffs • Non-tariff barriers Internal trade and transaction costs • Information costs • Contract enforcement costs • Red tape
  4. 4. Trade Barriers Transportation costs • Freight costs • Time costs • Customs Delays Policy barriers • Import Tariffs • Non-tariff barriers Internal trade and transaction costs • Information costs • Contract enforcement costs • Red tape
  5. 5. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  6. 6. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  7. 7. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  8. 8. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  9. 9. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  10. 10. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  11. 11. What Motivates Protectionism? Response to “Dumping” Response to chronic trade gap Employment protection Protect “fledgling” - infant sectors Protect key / strategic industries Raise revenues for the government Response to a recession / low demand
  12. 12. Tariffs / Import Duties
  13. 13. WTO Tariff Profile for 2012
  14. 14. Tariff Profiles - LDCs
  15. 15. Tariffs for Manufactured Goods
  16. 16. Tariffs for Textiles
  17. 17. Tariffs - Farming
  18. 18. Dumping
  19. 19. WTO Disputes
  20. 20. WTO Disputes (2)
  21. 21. Q1 Analysis of an import tariff Price Domestic Demand Output Q2 Domestic Supply World supply pre-tariffP1
  22. 22. Q4Q1 Analysis of an import tariff Price Domestic Demand Output Q2 Domestic Supply World supply pre-tariffP1 Supply after tariff Q3 Imports after tariff P2
  23. 23. Evaluation – indirect effects of tariffs • Higher prices• Cost push inflation risks • Damages other industries • Risk of tit for tat policies • Loss of allocative efficiency • Dynamic effects? Economic Efficiency Retaliation by affected nations Impact on lower income groups Costs and Inflation
  24. 24. Analysis of an import quota for steel Price Import Demand for steel Output Export Supply of steel (no quota)
  25. 25. Analysis of an import quota for steel Price Import Demand for steel Output Q1 Export Supply of steel (no quota) P1 Import Quota Quota P2
  26. 26. Arguments against Protectionism Risk of Retaliation Market Distortion Higher prices for consumers Regressive effect on income inequality By-passing import controls Higher costs for exporters
  27. 27. Arguments against Protectionism Risk of Retaliation Market Distortion Higher prices for consumers Regressive effect on income inequality By-passing import controls Higher costs for exporters
  28. 28. Arguments against Protectionism Risk of Retaliation Market Distortion Higher prices for consumers Regressive effect on income inequality By-passing import controls Higher costs for exporters
  29. 29. Arguments against Protectionism Risk of Retaliation Market Distortion Higher prices for consumers Regressive effect on income inequality By-passing import controls Higher costs for exporters
  30. 30. Arguments against Protectionism Risk of Retaliation Market Distortion Higher prices for consumers Regressive effect on income inequality By-passing import controls Higher costs for exporters
  31. 31. Arguments against Protectionism Risk of Retaliation Market Distortion Higher prices for consumers Regressive effect on income inequality By-passing import controls Higher costs for exporters
  32. 32. Pascal Lamy “Imports are an essential ingredient of a country’s export competitiveness. Around 40 per cent of the value of exported goods is in fact imported inputs”
  33. 33. Pascal Lamy “Imports are an essential ingredient of a country’s export competitiveness. Around 40 per cent of the value of exported goods is in fact imported inputs” Trade is no longer about finished products or services. It is about adding value by contributing to a stage in the production of a finished product or by providing services.
  34. 34. WTO
  35. 35. More great study resources from tutor2u: Economics Blog AS Macro Revision Notes

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