Question

Economist and politicians argue that few policies regarding trade restriction can help to create domestic job, increase GDP and make a domestic economy more competitive globally. Explain what are those strategies that can be used for this purpose?

Answer 1

Trade Protectionism helps to create domestic jobs, increase GDP and make a domestic economy more competitive globally.

What is trade protectionism?

Trade protectionism is described as when a country, or occasionally a collection of countries working together as a trade bloc, erects commerce barriers with the express purpose of defending its economy from potential risks associated with global trade.

Strategies that can be used for this purpose are:

• Tariffs, which are taxes on imports from other nations and international markets, are one tactic that can be employed for this aim. Here, the government is enforcing the tariff in an effort to limit the importation of products and services from abroad, safeguard its own industries and businesses that produce these things, and increase tax revenues.
• Quotas are specific limitations on the volume of a given class of goods, commodities, and products that may be allowed to be imported into a country. A particular group of people or businesses are typically granted import licenses in order to comply with this import quota.

• subsidies: Government payments to domestic producers are known as subsidies. This can take the form of monetary compensation, loans with low or no interest, tax deductions, or government ownership of common stock in domestic corporations.

• A country may impose local content requirements by establishing a manufacturing standard requiring that a specified part or parts of a product be manufactured domestically in an effort to reduce imports.
• Administrative trade policies are composed of laws, rules, and regulations that are intended to make it extremely difficult for someone to import goods or commodities into a specific country.
• Antidumping laws are put in place by a country to stop products from being sold in foreign markets for significantly less than their manufacturing costs in an effort to capture a sizable portion of that market.
• By reducing the value of a country's currency in the foreign exchange markets, exchange rate controls can be used to lower the price of a country's exports.

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