1. Discuss protectionism.

Protectionism is an economic policy that restricts or limits trade between

countries in order to protect domestic industries or sectors from foreign
competition. It is usually implemented through tariffs, quotas, subsidies, and
other regulations. Protectionist policies are designed to benefit the domestic
economy by protecting local businesses and industries from foreign
competition.

The primary goal of protectionism is to shield domestic industries from

foreign competition by providing growth opportunities and lowering imports.
However, protectionism can have a negative impact on the economy, such as
reducing competition, increasing prices for consumers, and limiting
opportunities for international trade and investment.

2. Explain barriers to trade.

Like protectionism barriers to trade are rules or regulations that are imposed
by countries on the import and export of goods and services. These barriers
can make it difficult for businesses to engage in international trade.

Barriers to international trade take place in form of tariffs and non-tariff

measures. Whereby tariffs are placed directly on imported items, while non-
tariff trade restrictions are imposed indirectly on imported items.

Tariff Barrier

A tariff is a tax imposed by the government on goods or services imported

from foreign countries. Tariffs have two-way benefits for the nation. First, it
protects domestic producers from the negative impacts of foreign countries
and second, it provides an additional source of revenue to the government.
When a country imposes a tariff on imported goods, it increases the price of
those goods for consumers. This makes domestically produced goods
relatively cheaper and more attractive to consumers, benefiting domestic
industries. However, it can also increase the cost of living for consumers and
reduce their purchasing power. Examples of tariff barriers:

1. Volorem tariff: This is a percentage of the value of the imported goods.

2. Specific tariff: This is a fixed amount per unit of imported goods.

One of the major criticisms of trade tariffs is that they can lead to retaliatory
measures from other countries, which can harm international trade and the
global economy. In addition, tariffs can also lead to higher prices for
consumers, as well as reduced competition, innovation, and efficiency in
domestic industries that are protected by the tariff.

A tariff is a barrier to trade such that; when a tariff is imposed on an imported

good, it raises the price of the good in the importing country. This can make
the imported goods less competitive in the domestic market, as consumers
may choose to purchase cheaper domestically produced goods instead.
Secondly, high prices resulting from tariffs can also lead to reduced demand
for imported goods. This can decrease the number of imported goods being
sold in the domestic market, which can harm foreign producers and limit
consumers’ choices.

Non-tariff barriers

Non-tariff barriers are restrictions that do not necessarily involve paying taxes.
These restrictions are in the form of conditions, prohibitions, or implemented
formalities that make importing foreign goods difficult and restrained. Non-
tariff barriers are beneficial to a nation such that they protect domestic
manufacturing companies while ensuring that foreign entrants have a share in
the nation’s market only after fulfilling certain conditions. Examples of non-
tariff barriers include Quotas, licensing, Anti-dumping legislation and
government restrictions.

1. Import quota: This is a type of trade barrier that restricts the quantity
of a particular imported product that can be brought into a country.
Import quotas can be used to protect domestic industries from foreign
 competition by limiting the supply of imported goods, but they can also
reduce consumer choice and increase prices.
2. Anti-dumping legislation: ‘Dumping’ is the practice of firms selling to
export markets at lower prices than are charged in domestic markets.
Anti-dumping laws prevent the import of cheaper foreign goods that
would cause local firms to close down.
3. Licensing: Licensing is a legal agreement between two parties that
allows one party to use the intellectual property of the other party in
exchange for payment, typically in the form of royalties or licensing fees.
Licensing is a barrier to trade such that licensing fees can be expensive,
especially for small and medium-sized enterprises (SMEs) that may not
have the resources to pay for licensing in foreign markets. This can
make it difficult for SMEs to enter new markets, as they may not be able
to afford the fees requires to license their products or technologies.
4. Restrictions on foreign direct investment: This comprises restrictions on
the acquisition of domestic firms by foreign investors.
5. Sanctions
6. Administrative barriers

Other types of barriers to trade comprise:

1. Subsidies

A subsidy is any financial aid provided by a government to a producer or

seller of a good or service that is designed to increase the competitiveness of
a particular industry firm or the entire industry. Subsidies are a barrier to trade
such that; when government provides subsidies to domestic industries or
products, they can distort prices and create an unfair advantage for domestic
producers. This can make it difficult for foreign competitors to compete on an
equal footing, as they are not receiving the same level of support for from
their governments. Secondly, subsidies can also encourage overproduction as
domestic producers may be incentivized to produce more than what is
needed to meet domestic demand. Types of subsidies barriers to trade
include:

a. Direct subsidies: These are lump-sum payments or cheap loans by the

government to local firms to help them adjust to the world markets.
b. Export subsidies: In export subsidies, the exporter gets payment, which
is a percentage or proportion of the value of exported.
2. Exchange rate control: Here a government may intervene in the
foreign exchange market to lower the value of its currency by selling its
currency in the foreign exchange market. Doing so will raise the cost of
imports and lower the cost of exports, leading to an improvement in its
trade balance.
3. International patent systems: The international patent system is a
barrier to trade in the following ways: Firstly, cost, patenting inventions
can be expensive, especially for small and medium-sized enterprises
(SMEs), which may not have the financial resources to navigate the
complex process of obtaining patents in multiple countries. This can be
a significant barrier to SMEs looking to export their products to foreign
markets as they may not be able to afford the cost of patent protection
in all the countries they wish to sell their products. Secondly, legal
complexity, The international patent system is highly complex, with
different rules and regulations in each country. This can create legal
barriers to trade, as companies may struggle to navigate the different
patent systems and comply with the various requirements.