Protectionist policy

Protectionist policy
See also
Government intervention Laissez faire government Global political economy Trade liberalization Barriers to trade Equalization payment Non-tariff barriers New international economic order Reflation

The protectionist policy of the state is the use of trade policy to limit the international trade and achieve some economic, social or politic effects.

The implements of protectionist trade policy

Economic protectionism include following government actions:

• high tariffs for imported goods,
• the policy which prefers national goods in spite of the fact that foreign products are cheaper,
• export credits with lower interest rates.

Economic goals of protectionist policy

Protectionism trade policies meet following state goals:

• supporting the national producers (production grows), give up import entirely and maximize the national income, however this argument is not correct. Import can also enlarge GDP, because it ensures investments and for that reason "self-sufficient" countries such as Cuba and Northern Korea belong to the poorest countries of the world,
• the protection of new industry sector (infant industry) - temporary protection can help, when some of the branches are not ready for international competitiveness. Opponents of this argument suggest, that there are no rational proofs, that such firms enlarge their competitiveness and they only get used to state help. The question which sectors will be protected is also a big problem.

Secondary goals of state protectionist policy

• the safety of state - the smaller participation of foreign supply in basic sector (energy, fuel, arms industry or delivery of food) the bigger safety in case of conflict or the war,
• social aspects - some of the developed countries protect their laborious sectors before much more competitive foreign producers,
• cultural aspects - for example the protection of Polish agriculture (the family agricultural farms are part of Polish tradition) or German wine producers who are part of folklore in their country.

References

• Blonigen, B. A., & Feenstra, R. C. (1997). Protectionist threats and foreign direct investment. In The effects of US trade protection and promotion policies (p. 55-80). University of Chicago Press.
• Corden, W. M. (1997). Trade policy and economic welfare. OUP Catalogue.
• Krueger, A. O. (1993). Free trade agreements as protectionist devices: Rules of origin (No. w4352). National Bureau of Economic Research.

Author: Alicja Walusiak