Question

What are the tools of protectionism? Explain each of them briefly.

Answer 1

ANS :-

Meaning :-

Protectionism is the practice of protectionist trade policy. protectionist trade policy allows the government to promote domestic producers, and boost the domestic production of goods and services by imposing tariffs & dutie.

Tariffs, import quotas, standardization, and subsidies are some of the primary policy tools a government use in protectionism. So we briefly discuss on this.

1) Tariffs :- ​​​​The taxes or duties imposed on imports are known as tariffs. Tariffs increase the price of imported goods in the domestic market, which hence, reduces the demand for them.

Ex :- In the U.S. market demand for indian shoes. but due to the imposition of tariffs, the price for the product increases from 100$ to 150$ each product. So that effect demand for Indian shoes in the U.S. market decrease.

2) Import quotas :- Import quotas are restrictions on the volume of imports for a particular good or service over a period of time. Quotas are known as a “non-tariff trade barrier.” A control on the supply causes an increase in the prices of imported goods, reducing the demand in the domestic market.

3) Standardization :- The goverment of a country may require all foreign products to adhere to certain guidelines. For instance, the U.S. Govt. may demand that all imported shoes include a certain proportion of leather. Standardization measures tend to reduce foreign products in the market.

4) Subsidies :- Subsidies are negative taxes or tax credits that are given to domestic producers by the government. They create a discrepancy between the price faced by consumers and the price faced by producers.