Reasons for protection
Protection can be defined as any type of government action that has the effect of giving domestic producers an artificial advantage over foreign competitors. The main
protectionist measures include tariffs, import quotas and subsidies. Infant industries New industries generally face many difficulties and risks in their early years. They usually start out on a small scale, with costs that are relatively higher than those of the more established firms competing in the international arena. It is argued that these ‘infant industries’ may need protection in the short run to enable them to expand their scale and reduce their costs of production so that they can compete with the rest of the world. Prevention of dumping Dumping occurs when foreign firms attempt to sell their goods in another country’s market at unrealistically low prices (i.e. below the price charged in the home country’s market). The practice of dumping may be used to dispose of large production surpluses or to establish a market position in another country. These low prices are usually only of a temporary nature but can harm domestic producers. Local firms that could normally compete with such foreign producers may be forced out of business, causing a loss in a country’s productive capacity and higher unemployment. "Types of Trade restriction" by mjmfoodie ( http://youtu.be/_e2gQxN1OBg) |
key terms
Protection refers to
government policies that give domestic producers an artificial advantage over foreign competitors, such as tariffs on imported goods. Dumping is Dumping is the practice of exporting goods to a country at a price lower than their selling price in their country of origin. |