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PROTECTIONISM

Presented by:
Radhika Uppal (439)
Jyoti Sachdeva (308)
Kamakshi Bhardwaj (310)
Nitesh Nagar (373)
Overview
• Definition: Protectionism is the economic policies and actions by
government to restrict imports from other countries by imposing
trade barriers such as tariffs on imported goods, import quotas,
and a variety of other government regulations.

• Protectionism in India has evolved gradually over the years since


independence. India was a closed economy till liberalization
(1991) but now is one of the world’s most transparent and open
economy.
Types of Barriers

NON- TARIFF
TARIFF BARRIER
BARRIER
Tariff Barrier

A barrier to trade between countries which takes the form of


abnormally high taxes levied by a government on imports or
occasionally exports for purposes of protection, support of the
balance of payments, or the raising of revenue.
Types of Tariff Barriers

A. On the basis of Direction


1. Import Tariff: A tariff on goods coming into a country from abroad, often used by
governments as a way of reducing imports and protecting local industries.
2. Export Tariff: An export tariff is a tax placed on a good that is exported from a
country. An export tariff specifically increases the cost to sell domestic goods overseas.
B. On the basis of Purpose
1.Protective Tariff: In order to protect domestic industries from stiff competition of
imported goods, protective tariff is levied on imports.
2. Revenue Tariff: In order to increase government revenue, revenue tariff is levied on
imports.
C. On the basis of Time Length
1. Temporary: Tariff levied for a short period
2. Permanent: Tariff which is levied permanently
Types of Tariff Barriers

D. On the basis of Tariff Rates


1. Specific Duty: Specific duty is based on the physical characteristics of goods.
When a fixed sum of money, keeping in view the weight or measurement of a
commodity, is levied as tariff, it is known as specific duty.

2. Ad Valorem Duty: These duties are imposed “according to value.” When a fixed
percent of value of a commodity is added as a tariff it is known as ad valorem
duty. It ignores the consideration of weight, size or volume of commodity.

3. Combined Duty: It is a combination of the specific duty and ad valorem duty on a


single product. For instance, there can be a combined duty when 10% of value (ad
valorem) and Re 1/- on every meter of cloth is charged as duty. Thus, in this case,
both duties are charged together.
Types of Tariff Barriers

E. On the basis of Production, Distribution and Consumption


1. Single stage: It is levied at a single point in the production and distribution system
– either at the producer or at the wholesaler or at the retailer.

2. Value Added: It is levied on the amount by which the value of an article has been
increased at each stage of its production or distribution.

3. Cascade: It is levied on a good at each stage of the production process up to the


point of being sold to the final consumer with each successive transfer being taxed
inclusive of any previous cascade taxes being levied.
Non-Tariff Barrier

A barrier to trade that restrict imports or exports of goods or


services through mechanisms other than the simple imposition of
tariffs which include quotas, embargoes, sanctions, levies and
other restrictions.
Types of Non- Tariff Barriers

1. Quota System: Under this system, a country may fix in advance, the limit of import
quantity of a commodity that would be permitted for import from various countries during
a given period. The quota system can be divided into the following categories:
(a) Import Quota: Certain specified quantity of imports is allowed at duty free or at a
reduced rate of import duty. Additional imports beyond the specified quantity are
permitted only at increased rate of duty.
(b) Export Quota: Certain specified quantity of exports is allowed at duty free or at a
reduced rate of export duty. Additional exports beyond the specified quantity are
permitted only at increased rate of duty.
Types of Non- Tariff Barriers

2. Government participation in trade:


a) Administrative guidelines
b) Subsidies
c) Government procurement and state trading: In some countries like India, certain
items are imported or exported only through canalising agencies like MMTC.
Individual importers or exporters are not allowed to import or export canalised
items directly on their own.
3. Customs and Entry procedures
a) Product classification
b) Product valuation
c) Documentation
d) Licence and Permit
e) Inspection
f) Health and Safety Regulation
Types of Non- Tariff Barriers

4. Product Requirement: Certain nations insist on particular type of packaging materials


and standards. Most developed countries impose product standards for imported items. If
the imported items do not conform to established standards, the imports are not allowed.
a) Product Standard
b) Packaging, Labelling and Making
c) Product Testing
d) Product Specification
5. Financial Control: The importer has to ensure that adequate foreign exchange is
available for import of goods by obtaining a clearance from exchange control authorities
prior to the concluding of contract with the supplier.
a) Exchange Control
b) Multiple Exchange Rate
c) Credit Restriction
d) Profit Remittance Restriction
Which is Better- Protectionism or Globalization?

Globalisation
Protectionism
• When govt put in place policies
• When govt put in place policies to
that allow producers from
stop overseas producers freely
overseas producers freely selling
selling goods in our
goods in our country (promote
country(restricted trade)
trade)
• Local business continue to grow
• Open up opportunities for
and provide local employment.
additional jobs.
• Product becomes less competitive.
• Cheaper goods and services.
Conclusion
Globalisation is better than protectionism as it helps
in the growth of economy.

Globalization means expanding the trade internationally and protectionism


means protecting domestic industries from foreign competition.
There are pros and cons to both, there is no denying that globalization has the
largest influences on exposing the country’s resources to world and
enriching millionaire corporate objectives.
There are various method of protectionism which government might use in order
to protect there infant industries like tariff , quotas, embargoes and so many
others.
Increasing protectionism will further increase slow economic growth but
globalization helps further to increase economy growth.
THANK YOU