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ECONOMY > ECONOMICS
Protectionism:
Examples and Types of
Trade Protections
By THE INVESTOPEDIA TEAM, Updated. April 11,2022
Reviewed by TOBY WALTERS
Fact checked by AMANDA BELLUCCO-CHATHAM
Protectionism
[pra-'tek-sha-ni-zam)
Government policies that
restrict international trade
to help domestic industries.
®@ investopedia
Investopedia / Jiaqi Zhou
Scanné avec CamScannerWhat Is Protectionism?
Protectionism refers to government policies
that restrict international trade to help
domestic industries. Protectionist policies are
usually implemented with the goal to improve
economic activity within a domestic economy
but can also be implemented for safety or
quality concerns.KEY TAKEAWAYS
Protectionist policies place specific
restrictions on international trade for
the benefit of a domestic economy.
Protectionist policies typically seek to
improve economic activity but may
also be the result of safety or quality
concerns.
The value of protectionism is a
subject of debate among economists
and policymakers.
Tariffs, import quotas, product
standards, and subsidies are some of
the primary policy tools a government
can use in enacting protectionist
policies.
Scanné avec CamScannerUnderstanding Protectionism
Protectionist policies are typically focused on
imports but may also involve other aspects of
international trade such as product standards
and government subsidies. The merits of
protectionism are the subject of fierce debate.18:22 B8Os all all 37%
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Critics argue that over the long term,
protectionism often hurts the people and
entities it is intended to protect by slowing
economic growth and increasing price
inflation, making free trade a better
alternative. Proponents of protectionism
argue that the policies can help to create
domestic jobs, increase gross domestic
product (GDP), and make a domestic economy
more competitive globally.
Types of Protectionist Tools
Tariffs
Import tariffs are one of the top tools a
government uses when seeking to enact
protectionist policies. There are three main
import tariff concepts that can be theorized for
protective measures. In general, all forms of
import tariffs are charged to the importing
country and documented at government
customs. Import tariffs raise the price of
imports for a country.
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Scientific tariffs are import tariffs imposed on
an item-by-item basis, raising the price of
goods for the importer and passing on higher
prices to the end buyer. Peril point import
tariffs are focused on a specific industry.
These tariffs involve the calculation of the
levels at which point tariff decreases or
increases would cause significant harm to an
industry overall, potentially leading to the
jeopardy of closure due to an inability to
compete. Retaliatory tariffs are tariffs enacted
primarily as a response to excessive duties
being charged by trading partners.
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TABLE OF CONTENTS v
put in place to limit the number of products
that can be imported over a set period of time.
The purpose of quotas is to limit the supply of
specified products provided by an exporter to
an importer. This is typically a less drastic
action that has a marginal effect on prices and
leads to higher demand for domestic
businesses to cover the shortfall.
Quotas may also be put in place to
prevent dumping, which occurs when foreign
producers export products at prices lower
than production costs. An embargo, in which
the importation of designated products is
completely prohibited, is the most severe type
of quota.
Product Standards
Product safety and low-quality products or
materials are typically top concerns when
enacting product standards. Product standarc’,
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Import Quotas
Import quotas are nontariff barriers that are
put in place to limit the number of products
that can be imported over a set period of time.
The purpose of quotas is to limit the supply of
specified products provided by an exporter to
an importer. This is typically a less drastic
action that has a marginal effect on prices and
leads to higher demand for domestic
businesses to cover the shortfall.
Quotas may also be put in place to
prevent dumping, which occurs when foreign
producers export products at prices lower
than production costs. An embargo, in which
the importation of designated products is
completely prohibited, is the most severe type
of quota.
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Product Standards
Product safety and low-quality products or
materials are typically top concerns when
enacting product standards. Product standard
protectionism can be a barrier that limits
imports based on a country’s internal controls.
Some countries may have lower regulatory
standards in the areas of food preparation,
intellectual property enforcement, or
materials production. This can lead to a
product standard requirement or a blockage
of certain imports due to regulatory
enforcement. Overall, restricting imports
through the implementation of product
standards can often lead to a higher volume of
production domestically.
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For one example, consider French cheeses
made with raw instead of pasteurized milk,
which must be aged at least 60 days prior to
being imported to the U.S. Because the
process for producing many French kinds of
cheese often involves aging of 50 days or
fewer, some of the most popular French
cheeses are banned from the U.S., providing
an advantage for U.S. producers. 1)
Government Subsidies
Government subsidies can come in various
forms. Generally, they may be direct or
indirect. Direct subsidies provide businesses
with cash payments. Indirect subsidies come
in the form of special savings such as interest-
free loans and tax breaks.
When exploring subsidies, government
officials may choose to provide direct or
indirect subsidies in the areas of production,
employment, tax, property, and more.
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Scanné avec CamScannerWhen seeking to boost a country’s balance of
trade, a country might also choose to offer
subsidies to businesses for exports. Export
subsidies provide an incentive for domestic
businesses to expand globally by increasing
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What Are Examples of
Protectionism?
Common examples of protectionism, or tools
that are used to implement a policy of
protectionism include tariffs, quotas, and
subsidies. All of these tools are meant to
promote domestic companies by making
foreign goods more expensive or scarce.
Is Protectionism Left-Wing or Right-
Wing Politics?
Traditionally, protectionism is a left-wing
policy. Right-wing politics generally support
free trade, which is the opposite of a
protectionist stance. Left-wing politics support
economic populism, of which protectionism is
a part.
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What Are the Arguments for
Protectionism?
Lawmakers that favor protectionist trade
policies believe that they protect jobs at
home, help support and grow small
companies and industries, and provide a layer
of security to the nation.
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