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By the end of this section, you will be able to:

  • Explain protectionism and its three main forms
  • Analyze protectionism through concepts of demand and supply, noting its effects on equilibrium
  • Calculate the effects of trade barriers

When a government legislates policies to reduce or block international trade it is engaging in protectionism    . Protectionist policies often seek to shield domestic producers and domestic workers from foreign competition. Protectionism takes three main forms: tariffs, import quotas, and nontariff barriers.

Recall from International Trade that tariffs    are taxes imposed on imported goods and services. They make imports more expensive for consumers, discouraging imports. For example, in recent years large, flat-screen televisions imported from China have faced a 5% tariff rate.

Another way to control trade is through import quotas    , which are numerical limitations on the quantity of products that can be imported. For instance, during the early 1980s, the Reagan Administration imposed a quota on the import of Japanese automobiles. In the 1970s, many developed countries, including the United States, found themselves with declining textile industries. Textile production does not require highly skilled workers, so producers were able to set up lower-cost factories in developing countries. In order to “manage” this loss of jobs and income, the developed countries established an international Multifiber Agreement that essentially divided up the market for textile exports between importers and the remaining domestic producers. The agreement, which ran from 1974 to 2004, specified the exact quota of textile imports that each developed country would accept from each low-income country. A similar story exists for sugar imports into the United States, which are still governed by quotas.

Nontariff barriers are all the other ways that a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products. A rule requiring certain safety standards can limit imports just as effectively as high tariffs or low import quotas, for instance. There are also nontariff barriers in the form of “rules-of-origin” regulations- these rules describe the “Made in Country X” label as the one in which the last substantial change in the product took place. A manufacturer wishing to evade import restrictions may try to change the production process so that the last big change in the product happens in his or her own country. For example, certain textiles are made in the United States, shipped to other countries, combined with textiles made in those other countries to make apparel—and then re-exported back to the United States for a final assembly, to escape paying tariffs or to obtain a “Made in the USA” label.

Despite import quotas, tariffs, and nontariff barriers, the share of apparel sold in the United States that is imported rose from about half in 1999 to about three-quarters today. The U.S. Bureau of Labor Statistics (BLS), estimated the number of U.S. jobs in textiles and apparel fell from 666,360 in 2007 to 385,240 in 2012, a 42% decline. Even more U.S. textile industry jobs would have been lost without tariffs, however, domestic jobs that are saved by import quotas come at a cost. Because textile and apparel protectionism adds to the costs of imports, consumers end up paying billions of dollars more for clothing each year.

Questions & Answers

How does market failure arise from the characteristics of public goods
Linda Reply
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Zahoor
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Michel
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Samantha Reply
there are how many types of demand?
Young Reply
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Samantha Reply
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Samantha
1- how to determine the optimal level of output and price in the short run? 2-how to calculate the economic profit (loss) the firm will obtain(incure)in monopolistic competition faces short run demand and cost functions as Qd=20-0.5P and TC=4Q -8Q+15
Kalid Reply
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Samantha
what is asset ?
Rather Reply
something u own or valuable
Michel
In Accounting, asset is anything that is owned by the business.
James
economic item used for father more production
Dicklearz
give the dimand equation QD=24-2p find the inverse dimand equation
Kadir
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Samantha
invest ment on one self
Samantha
proudtion is product of personal apprences quality is guilty I go to the shop
Samantha
sometimes I go to the shop my hair solono lady past
Samantha
so I have quipt my self to handle thing of higher in quality my self
Samantha
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Samantha
Or in avible
Samantha
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Samantha
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Samantha
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Samantha
what is Asset your market value of your top roman
Samantha
Discuss the following questions in detail. 1, Suppose a firm operating under a perfectly competitve market structure is in its equilibrium. Does mean the firm is making excess profit?if no, show the possibilities regarding the amount of profit under equilibrium position. 2, Discuss the distinction b
Sura Reply
in long run a perfectly competitive firm is making only normal profits ,
Rather
Can I be part of this discussion?
James
of course
Rather
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Jnana Reply
Workout. Show the steps clearly. 1, Suppose a firm in a perfectly competitive market structure has the following total cost function, ( TC=6000+4Q-24Q the power 2 + 4Q the power 3 ) if market ptice is 40, find A, Equilibrium level of output produced by the firm in order to maximize its profit. B,
Sura Reply
Discuss the following questions in detail. 1, Suppose a firm operating under a perfectly competitve market structure is in its equilibrium. Does mean the firm is making excess profit?if no, show the possibilities regarding the amount of profit under equilibrium position. 2, Discuss the distinction b
Sura
given the dimand equation QD=24-2p find the inverse dimand equation ?
Kadir Reply
you m.i.l subject
Raj
you know m.i.l subject
Raj
giveTc 10=+6Q-0 ,9Q2+0.05Q3 then calculated the following Tvc Avc ATC MC and AFC
Kadir
answer
Kadir
shift in demand curve
Adeoye Reply
Hi Adeoye
Oluyemi
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Tanbir
hello...
Ajay
hi
Arslan
Hello bhadwooo
dipanshu
why in monopolistic competition the demand curve shifts to the left
Wani Reply
Because the players are few and due to the fact that their products are differentiated, they have market influence on either price to be charged or quantity to be offered to the market
Diyaolu
given Tc=10 +6Q-0,9Q2+0,05Q3 what is Tvc ? ATc ? mc?
Kadir Reply
Tvc=6q-0.9q2+0.05q3
Diyaolu
Atc=10/q-0.9q+0.05q2
Diyaolu
Mc=6-1.8q+0.15q2
Diyaolu
Avc of produs 2units of output and mc of producing 6units of output and AFC
Kadir
1- how to determine the optimal level of output and price in the short run? 2-how to calculate the economic profit (loss) the firm will obtain(incu...
Kalid
why demand curve shifts to left in long run
Wani Reply
because in long run when the demand of product is more so price will be more and due to increase in price of quantity demanded will be less and demand curve will shift left gradually
Iqra
Shift in demand curve is caused by a number of factors like taste, fashion, population amongst others and depending on whether the factors are positive or negative, that would determine the shift of the demand curve whether left or right and not whether short run or long run
Diyaolu
what is focus of microeconomics
Ebisa Reply

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Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
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