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Protectionism is the economic policy of restraining trade between states

through methods such as tariffs on imported goods, restrictive quotas, and


a variety of other government regulations designed to
discourage imports and prevent foreign take-over of domestic markets and
companies.

What Does Protectionism Mean?


Government actions and policies that restrict or restrain international trade,
often done with the intent of protecting local businesses and jobs from
foreign competition. Typical methods of protectionism are import tariffs,
quotas, subsidies or tax cuts to local businesses and direct state intervention.

This policy contrasts with free trade, where government barriers to trade and
movement of capital are kept to a minimum. In recent years, it has become
closely aligned with anti-globalization. The term is mostly used in the context
of economics, where protectionism refers to policies or doctrines which
protect businesses and workers within a country by restricting or regulating
trade with foreign nations.
1) Arguments for Protectionism
2) Protection of infant industries
3) Prevention of dumping
4) Protection of domestic employment
5) Defence
6) Divercification
7) Cheap foreign labour
i. Child labour refers to the employment of children at regular and
sustained labour. This practice is considered exploitative by
many international organizations and is illegal in many countries. Child
labour was utilized to varying extents through most of history, but
entered public dispute with the advent of universal schooling, with
changes in working conditions during the industrial revolution, and
with the emergence of the concepts ofworkers' and children's rights.
ii. Collective bargaining is a process of negotiations between employers
and the representatives of a unit of employees aimed at reaching
agreements which regulate working conditions. Collective agreements
usually set out wage scales, working hours, training, health and safety,
overtime, grievance mechanisms and rights to participate in workplace
or company affairs.
iii. A minimum wage is the lowest hourly, daily or
monthly remuneration that employers may legally pay to workers.
Equivalently, it is the lowest wage at which workers may sell their
labour. Although minimum wage laws are in effect in a great many
jurisdictions, there are differences of opinion about the benefits and
drawbacks of a minimum wage. Supporters of the minimum wage say
that it increases the standard of living of workers and reduces poverty.
[1]
Opponents say that if it is high enough to be effective, it increases
unemployment, particularly among workers with very low productivity
due to inexperience or handicap, thereby harming lesser skilled workers
to the benefit of better skilled workers.
Protectionist policies

1. Tariffs: Typically, tariffs (or taxes) are imposed on imported goods. Tariff rates usually
vary according to the type of goods imported. Import tariffs will increase the cost to importers,
and increase the price of imported goods in the local markets, thus lowering the quantity of
goods imported. Tariffs may also be imposed on exports, and in an economy with floating
exchange rates, export tariffs have similar effects as import tariffs. However, since export tariffs
are often perceived as 'hurting' local industries, while import tariffs are perceived as 'helping'
local industries, export tariffs are seldom implemented.

There are various types of tariffs:

 An ad valorem tariffs is a set percentage of the value of the good that is being imported.
Sometimes these are problematic, as when the international price of a good falls, so does the
tariff, and domestic industries become more vulnerable to competition. Conversely, when the
price of a good rises on the international market so does the tariff, but a country is often less
interested in protection when the price is high.

 They also face the problem of inappropriate transfer pricing where a company declares a value
for goods being traded which differs from the market price, aimed at reducing overall taxes due.

 A SPECIFIC tariff, is a tariff of a specific amount of money that does not vary with the price of the
good. These tariffs are vulnerable to changes in the market or inflation unless updated
periodically.
 A REVENUE tariff is a set of rates designed primarily to raise money for the government. A tariff
on coffee imports imposed by countries where coffee cannot be grown, for example, raises a
steady flow of revenue.
 A PROHIBITIVE tariff is one so high that nearly no one imports any of that item.
 A PROTECTIVE tariff is intended to artificially inflate prices of imports and protect domestic
industries from foreign competition (see also effective rate of protection,) especially from
competitors whose host nations allow them to operate under conditions that are illegal in the
protected nation, or who subsidize their exports.
 An environmental tariff, similar to a 'protective' tariff, is also known as a 'green' tariff or 'eco-
tariff', and is placed on products being imported from, and also being sent to countries with
substandard environmental pollution controls.
 A RETALIATORY tariff is one placed against a country who already charges tariffs against the
country charging the retaliatory tariff (e.g. If the United States were to charge tariffs on Chinese
goods, China would probably charge a tariff on American goods, also). These are usually used in
an attempt to get other tariffs rescinded.

2. Import quotas: To reduce the quantity and therefore increase the market price of
imported goods. The economic effects of an import quota is similar to that of a tariff, except that
the tax revenue gain from a tariff will instead be distributed to those who receive import licenses.
Economists often suggest that import licenses be auctioned to the highest bidder, or that import
quotas be replaced by an equivalent tariff.
3. Administrative barriers: Countries are sometimes accused of using their various
administrative rules (e.g. regarding food safety, environmental standards, electrical safety, etc.)
as a way to introduce barriers to imports.
4. Anti-dumping legislation Supporters of anti-dumping laws argue that they prevent
"dumping" of cheaper foreign goods that would cause local firms to close down. However, in
practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters.
5. Direct subsidies: Government subsidies (in the form of lump-sum payments or cheap
loans) are sometimes given to local firms that cannot compete well against foreign imports.
These subsidies are purported to "protect" local jobs, and to help local firms adjust to the world
markets.
6. Export subsidies: Export subsidies are often used by governments to increase exports.
Export subsidies are the opposite of export tariffs, exporters are paid a percentage of the value of
their exports. Export subsidies increase the amount of trade, and in a country with floating
exchange rates, have effects similar to import subsidies.
7. Exchange rate manipulation: 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. However, such a policy is only effective in the short run, as it will most likely
lead toinflation in the country, which will in turn raise the cost of exports, and reduce the relative
price of imports.
8. International patent systems: There is an argument for viewing national patent systems
as a cloak for protectionist trade policies at a national level. Two strands of this argument exist:
one when patents held by one country form part of a system of exploitable relative advantage in
trade negotiations against another, and a second where adhering to a worldwide system of
patents confers "good citizenship" status despite 'de facto protectionism'. Peter Drahos explains
that "States realized that patent systems could be used to cloak protectionist strategies. There
were also reputational advantages for states to be seen to be sticking to intellectual property
systems. One could attend the various revisions of the Paris and Berne conventions, participate
in the cosmopolitan moral dialogue about the need to protect the fruits of authorial labor and
inventive genius...knowing all the while that one's domestic intellectual property system was a
handy protectionist weapon.