Which trade policy argument suggests that a government should use subsidies to support promising firms that are active in newly emerging industries?
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Abstract Protectionist policies have increased in the 1980s, stimulated in part by slow growth in the world economy, major imbalances between regions, persistent unemployment in Europe, and structural difficulties over the United States external payments deficit. At the same time, new developments in economics have led to a reassessment of traditional arguments for and against a liberal trading order. Commercial policy is now very much on the international agenda with the start of a new round of negotiations under GATT. There is a clear danger that protectionism will increase further, and at the same time a hope that it can be avoided. This Assessment analyses the developing pressures and examines the relevance of economics to the practical questions faced by policy makers. Show
Journal Information Each issue concentrates on a current theme in economic policy, with a balance between macro- and microeconomics, giving a valuable appraisal of economic policies worldwide. While the analysis is challenging and at the forefront of current thinking, articles are presented in non-technical language to make them readily accessible to all readers (such as government, business and policy-makers, academics and students). It is required reading for those who need to know where research is leading. Publisher Information Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide. OUP is the world's largest university press with the widest global presence. It currently publishes more than 6,000 new publications a year, has offices in around fifty countries, and employs more than 5,500 people worldwide. It has become familiar to millions through a diverse publishing program that includes scholarly works in all academic disciplines, bibles, music, school and college textbooks, business books, dictionaries and reference books, and academic journals. Rights & Usage This item is part of a JSTOR Collection. What Is Protectionism?Protectionism refers to government policies that restrict international trade to help domestic industries. Protectionist policies are usually implemented with the goal to improve economic activity within a domestic economy but can also be implemented for safety or quality concerns. Key Takeaways
ProtectionismUnderstanding ProtectionismProtectionist policies are typically focused on imports but may also involve other aspects of international trade such as product standards and government subsidies. The merits of protectionism are the subject of fierce debate. Critics argue that over the long term, protectionism often hurts the people and entities it is intended to protect by slowing economic growth and increasing price inflation, making free trade a better alternative. Proponents of protectionism argue that the policies can help to create domestic jobs, increase gross domestic product (GDP), and make a domestic economy more competitive globally. Types of Protectionist ToolsTariffsImport tariffs are one of the top tools a government uses when seeking to enact protectionist policies. There are three main import tariff concepts that can be theorized for protective measures. In general, all forms of import tariffs are charged to the importing country and documented at government customs. Import tariffs raise the price of imports for a country. Scientific tariffs are import tariffs imposed on an item-by-item basis, raising the price of goods for the importer and passing on higher prices to the end buyer. Peril point import tariffs are focused on a specific industry. These tariffs involve the calculation of the levels at which point tariff decreases or increases would cause significant harm to an industry overall, potentially leading to the jeopardy of closure due to an inability to compete. Retaliatory tariffs are tariffs enacted primarily as a response to excessive duties being charged by trading partners. Import QuotasImport quotas are nontariff barriers that are put in place to limit the number of products that can be imported over a set period of time. The purpose of quotas is to limit the supply of specified products provided by an exporter to an importer. This is typically a less drastic action that has a marginal effect on prices and leads to higher demand for domestic businesses to cover the shortfall. Quotas may also be put in place to prevent dumping, which occurs when foreign producers export products at prices lower than production costs. An embargo, in which the importation of designated products is completely prohibited, is the most severe type of quota. Product StandardsProduct safety and low-quality products or materials are typically top concerns when enacting product standards. Product standard protectionism can be a barrier that limits imports based on a country’s internal controls. Some countries may have lower regulatory standards in the areas of food preparation, intellectual property enforcement, or materials production. This can lead to a product standard requirement or a blockage of certain imports due to regulatory enforcement. Overall, restricting imports through the implementation of product standards can often lead to a higher volume of production domestically. For one example, consider French cheeses made with raw instead of pasteurized milk, which must be aged at least 60 days prior to being imported to the U.S. Because the process for producing many French kinds of cheese often involves aging of 50 days or fewer, some of the most popular French cheeses are banned from the U.S., providing an advantage for U.S. producers. Government SubsidiesGovernment subsidies can come in various forms. Generally, they may be direct or indirect. Direct subsidies provide businesses with cash payments. Indirect subsidies come in the form of special savings such as interest-free loans and tax breaks. When exploring subsidies, government officials may choose to provide direct or indirect subsidies in the areas of production, employment, tax, property, and more. When seeking to boost a country’s balance of trade, a country might also choose to offer subsidies to businesses for exports. Export subsidies provide an incentive for domestic businesses to expand globally by increasing their exports internationally. What Are Examples of Protectionism?Common examples of protectionism, or tools that are used to implement a policy of protectionism include tariffs, quotas, and subsidies. All of these tools are meant to promote domestic companies by making foreign goods more expensive or scarce. Is Protectionism Left-Wing or Right-Wing Politics?Traditionally, protectionism is a left-wing policy. Right-wing politics generally support free trade, which is the opposite of a protectionist stance. Left-wing politics support economic populism, of which protectionism is a part. What Are the Arguments for Protectionism?Lawmakers that favor protectionist trade policies believe that they protect jobs at home, help support and grow small companies and industries, and provide a layer of security to the nation. What is a strategic trade policy quizlet?strategic trade policy argues for government intervention to help companies take advantage of economies of scale and be first movers in their industries but this may cause inefficiency higher costs and trade wars. ... the most common cultural motive for trade intervention is protection of national identity.
What is considered the most common political argument for government intervention in foreign trade?The political arguments for trade intervention are plentiful and are designed to: Protect jobs and overall industries. Protect national security. Political retaliation.
Who benefits most from receiving subsidies?While many industries receive government subsidies, three of the biggest beneficiaries are energy, agriculture, and transportation.
How subsidies work as a trade restriction?Another common barrier to trade is a government subsidy to a particular domestic industry. Subsidies make those goods cheaper to produce than in foreign markets. This results in a lower domestic price. Both tariffs and subsidies raise the price of foreign goods relative to domestic goods, which reduces imports.
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