In: Economics
Explain the different types of trade restrictions and how they affect consumer and producer surplus overall.
Explain protectionism in your own words.
What are the three main forms and briefly explain each.
List some pros and cons of protectionism (0.5 points) explain each one with your own words.
The major type of trade restrictions are tariff, quota, embargo,
licenses, standards subsidies etc.
Tariff is the tax imposed on import items. This tax will raise the
price of import goods. This will help the domestic production. This
tariff imposition will raise the producer surplus. The producers
imposed higher price for this goods. This affects the consumers
very badly. And negatively affect the consumer surplus.
Quota is also similar to the tariff. Quota creates a restriction on
the amount of goods which imported. This quota will reduce the
import and this will induce the domestic producers to increase
their production through increasing the price level.
Embargo will stop the export or import of a product from or to
other countries. This embargo will increase both consumer surplus
and producer surplus, which depends on the implementation.
Licenses will badly affect the producers. The domestic importers of
foreign goods with license will affect their production and
business maintenance in the domestic market.
Subsidies are the reverse of tariffs. Through subsidies the
government helped the firms to export. Thus raise the investment
and the overall production. This will make the increasing level of
producer surplus. On the other hand, the consumer surplus will also
increase through the subsidies.
Protectionism means protecting domestic industries from foreign
competitive market. These are the government policies which
restrict international trade. This will improve the development of
domestic industries and also increase the GDP of domestic economy.
This will ensure safety and quality of the domestic products.
Tariffs, import quotas, product standard and other subsidies are
the major protectionist tools. This protectionist policy will
increase the domestic job and at the same time it increases the GDP
of the nation. This will improve the domestic economy more
competitive globally.
The major advantages of protectionism include;
Protectionism provides growth opportunities to the local industries
until they attain a level were ready to compete with other
countries.
This reduces the level of imports. This reduces the dependence of
the domestic countries towards foreign market. This will increase
the trade balances.
Increase the employment opportunities. The promotion of local
industries increases the demand for workforce and labour
power.
It will lead to increase in GDP. The increasing GDP will improve
the living standards and the social conditions in the domestic
country.
Disadvantages;