gcse economics - international trade - protectionism, trade barriers and free trade

PROTECTIONISM

The restriction of imports into a country by government measures

REASONS FOR PROTECTIONISM

• Protects UK businesses from extra competition
• Helps new UK businesses to develop before they face competition
• Helps protect UK jobs
• Prevents foreign countries ‘dumping’ lots of cheap imports into the UK
• Prevents imports of harmful or desirable goods

TRADE BARRIERS / METHODS OF PROTECTIONISM

- TARIFFS or IMPORT DUTIES These are taxes on imported goods. They raise the price to customers and make them less attractive
- QUOTAS These are limits on the quantity of a product that can be imported into a country e.g. 100,000 cars
- REGULATIONS This includes laws and safety guidelines

FREE TRADE

Trade without any protectionist / trade barriers between countries

BENEFITS OF FREE TRADE & PROBLEMS OF TRADE BARRIERS

1. Protectionism keeps UK firms away from genuine competition. They may become lazy and inefficient

2. Free trade forces UK firms to produce quality goods and services as they face much foreign competition

3. If the UK puts up trade barriers then other countries are likely to retaliate.

4. Free trade encourages firms to export and import. This should encourage a greater choice for consumers and a higher standard of living

5. Trade barriers increase the cost of trading. For example, a tariff would mean that UK firms and consumers may have to pay more for imports of raw materials or consumer goods

ACTION

A What is the difference between a tariff and a quota?
B Why do new infant industries need time to develop?
C Why might other countries retaliate against the UK if it imposed protectionist policies?