February 5th, 2009
A protectionist policy is a policy adopted by a country in which certain trade barriers are imposed on international trade for some specific reasons.
The following are some of the ways/mode/instruments used when a country practiced protectionist policy:-
- Is a tax imposed on imported goods.
- Main form of protection to protect local industries plus acting as a source of governement revenue.
- Impact of such tariff results in higher price of imported goods hoping that local demand will decrease.
- The degree of success of tariff protection strongly depends on the elasticity of demand for imported goods re: higher the elasticity the more effective the use of tariff measure
- Is a limit on the quantity of imports.
- Used to protect local industries as well as for political reason.
- Unlike tariff protection, imposing quota will not affect the price of imported goods hence not going to increase the government revenue.
- Physical control to ban the imports of certain goods like drugs, pornographic materials,etc.
- Imposed for economic, social and political reasons
- Use to restrict or control the amount of foreign curriences that can be bought by importers.
- Purpose is to restrict the ability to import.
VOLUNTARY EXPORT RESTRICTION
- By using persuasion to ask another country to place a limit on its exports.
- Example, like country A persuade country B to limits its car exports to relieve the competitive pressure on country A’s domestic car producers