4.3 Arguments for & Against Trade Protection (DP IB Economics: HL): Flashcards
0Still learning
Know0
Define the infant industry argument.
Was this flashcard helpful?
Cards in this collection (13)
Define the infant industry argument.
The infant industry argument justifies protecting new firms that would be unlikely to survive global competition at start-up, with support removed once they become established.
Why do governments protect strategic industries?
Governments protect strategic industries such as energy, defence and agriculture because they are essential to self-sufficiency and security, and reliance on other countries creates vulnerabilities.
When imports are greater than exports, more money leaves the country than enters it, and protectionism aims to correct this .
When imports are greater than exports, more money leaves the country than enters it, and protectionism aims to correct this imbalance.
Define a sunset industry.
A sunset industry is one in decline at the end of its life cycle that a government may protect to limit the economic damage caused if it closed abruptly.
Define dumping.
Dumping is an anti-competitive practice by foreign firms that can harm a country's domestic industries, and countering it is used as an argument for trade protection.
True or False?
Protectionism increases the choice of goods and services available to consumers.
False.
Protectionism reduces both the quantity and variety of goods and services available to consumers.
What is meant by retaliation as an argument against protectionism?
Retaliation occurs when foreign governments respond to protectionism with their own measures, which further harm free trade.
Define resource misallocation as an argument against protectionism.
Resource misallocation occurs when protectionism shifts production away from more efficient foreign producers to less efficient domestic producers, reducing global welfare.
How does protectionism affect manufacturers that rely on imported raw materials?
It increases their costs of production, which may generate inflation in the economy and/or lead to a loss of employment.
True or False?
Protectionism encourages domestic firms to become more efficient and innovative.
False.
With a reduced level of competition, domestic firms become less productively efficient and spend less on research, development and innovation.
As an economy moves towards free trade, unemployment often develops as certain industries move abroad.
As an economy moves towards free trade, structural unemployment often develops as certain industries move abroad.
What has been argued to lie at the heart of nationalism?
Structural unemployment is argued to lie at the heart of nationalism, as angry workers seek to expel foreigners and reclaim their jobs.
Why do MEDCs often place tariffs on manufactured goods imported from LEDCs?
To prevent LEDCs from generating higher profits on value-added goods, for example a high tariff on Ghanaian chocolate while cocoa beans enter the USA tariff-free.
Sign up to unlock flashcards
or