Protectionism

-Approach used by governments to protect domestic producers

-Trade barriers are measures designed to restrict imports

Preventing Dumping

• If a government feels overseas firms are dumping goods
• Dumping is where an overseas firm sells large quantities of a product below cost in the domestic market
• It's unfair competition for domestic users

Protecting Employment

• If domestic industries need protection from overseas competitors to save jobs

Protecting infant industries

• New industries yet to establish themselves to be protected from strong overseas rivals

To Gain Tariff Revenue

• Gov can raise revenue with tariffs on imports

Preventing the entry of harmful or unwanted goods

• If a gov feels overseas producers are selling goods that are harmful or unwanted

Reduce Current Deficits

• A gov may try to reduce imports and increase exports at the same time

Retaliation

• A gov may feel obliged to retaliate by imposing heavy taxes on those goods when they come into the country. 
• It May occur if a country imposes trade barriers on exporters.
• Can result in a trade war

Tariffs: a tax on imports to make them more expensive

• Will reduce demand for imports and increase demand for hoods produced at home
• The advantage is they also raise gov revenue. 
• But if set too high, imports will cease and consumers don't benefit

Quotas: the physical limit on the number of imports allowed into a country

• They will raise prices because fewer of the cheaper imports are available
• Helps protect employment because domestic producers have to meet the demand
• The advantage is that foreign can't easily get round them by adjusting prices
• Disadvantage is consumer choice is restricted

Subsidies: Money paid by a gov or organisation to make prices lower

• Lower prices for consumer  because they reduce production costs and increase supply
• May break terms of free trade agreements
• More domestic firms are encouraged to enter the market. 
• Costs the government money

Tariffs and Qoutas

• Tariff raises price and supply decrease (shift left)

Suubsidies

• Supply increase and price decreases