Protectionism

Vs
Free trade

By Sophia & Joey

The conflicts

Free trade: international trade not

restricted by tariffs and other
protectionist measures

Protectionism: protecting domestic producers fro

m foreign competition.

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B ef or
e
the

Ta

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f
ri

Four(five?) mai
n types of prot
ectionism
(as I know)

Quo
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Ex idies
sE
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xch
su
ang
e
con
trol

Advantages:
To safeguard employment in the home economy.
To correct balance of payments disequilibrium
To encourage the declining industries to make tec
hnology progress

It might become a waste o

f money and resources if t
he declining industries ca
nt make any achievement.

A larger increase in unem

ployment rate might be ca
used.

It might lead to a competit

ion between countries for
the amount of subsidies.

Disadvantages
:

Declining industries

:
e
d
i
s
d
o
o
g
Analysis:
e
h
t
r
o
F
If declining ( also called sunset) industries, which
have lost their comparative advantage, go out of
business quickly there may be a sudden and larg
e rise in unemployment.
If the industry is granted protection and that prot
ection is gradually removed, unemployment migh
t be avoided.
As the industry reduce its output, some workers
may retire and some leave for jobs in other indus
tries.

There is again, however, a risk that the industry

may resist reduction in the protection it receives.
This can lead to considerable inefficiency.

For example, if a country chooses to provide subs

idies to its domestically produced rubber plants
while controls the amount of imported rubber, th
is can result in an increase in price of all products
made of rubber e.g. tires.
The whole industry might lose its competitive adv
antages due to the rising prices.

ap r
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Ch bbe
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As a conclusion:
Protection for these industries would act as an in
centive to for firms to invest and reinvent themse
lves.
However
, protectionism could also be an excuse f
or protecting inefficient firms.

But if we consider this question

for a higher purpose

This kind of protectionism n

ot only cant change a count
rys economys condition, bu
t also will do harm to it, bec
ause most imports a countr
y prevents are basic to the fi
nal products.

A barrier built up for these cheap imports to com

e into this countrys market might result in a barri
er which prevents the whole production system a
chieving efficiency.

Terrible res
ults:

Terrible results:

Excessive subsidies

You are not welcomed!!!!!!!

NO ONE WILL
BECOME THE WINNER!

Thanks!!!!!!!!