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Protectionism

Policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other handicaps placed on imports. The chief protectionist measures, government-levied tariffs, raise the price of imported articles, making them less attractive to consumers than cheaper domestic products. Import quotas, which limit the quantities of goods that can be imported, are another protectionist device.

Methods of Protectionism

Tariffs

A tariff is a tax on foreign goods upon importation. Tariff rates vary according to the type of goods imported. Import tariffs will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported.

Quotas

An import quota is a type of protectionist that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. This leads to a reduction in the quantity imported and therefore increases the market price of imported goods. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy.

Administrative Barriers

Countries are sometimes accused of using their various administrative rules (eg. regarding food safety, environmental standards, electrical safety, etc.) as a way to introduce barriers to imports.

Embargo

An embargo is the prohibition of commerce and trade with a certain country, in order to isolate it and to put its government into a difficult internal situation, given that the effects of the embargo are often able to make its economy suffer from the initiative.

Subsidies

Government subsidies (in the form of lump-sum payments or cheap loans) are sometimes given to local firms that cannot compete well against foreign imports. These subsidies are purported to "protect" local jobs, and to help local firms adjust to the world markets.

Anti-dumping legislation

Supporters of anti-dumping laws argue that they prevent "dumping" of cheaper foreign goods that would cause local firms to close down. However, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters.

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