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Economics Revision Resources

Advantages of Protectionism

Protectionism—using tariffs, quotas, import licenses, and other measures to restrict foreign competition—can yield several potential benefits for an economy. While free trade boosts efficiency, strategically applied protectionist policies may help governments achieve broader economic and social goals. Below, we outline the main advantages.


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1. Safeguarding Domestic Employment

  • Job protection in vulnerable sectors

    • By making imports more expensive (through tariffs) or limiting their quantities (via quotas), domestic firms face less competition from low-cost foreign producers. This can help preserve jobs in industries under threat from sudden import surges.


  • Stabilizing communities

    • Maintaining local manufacturing or agriculture keeps regional economies intact, preventing unemployment-driven declines in household incomes and public finances.


2. Nurturing Infant Industries


  • Infant-industry argument

    • New or emerging sectors often lack economies of scale and technological know-how to compete internationally at first. Temporary protection gives them time to grow, innovate, and achieve cost efficiencies.


  • Long-run competitiveness

    • Once mature, these industries can enter global markets on more equal footing, leading to higher overall national income.



3. National Security and Strategic Autonomy

  • Essential goods and defence

    • Dependence on foreign suppliers for critical items—such as medical equipment, energy inputs, or military hardware—can be risky in geopolitical crises. Protectionist measures help ensure domestic capacity.


  • Supply-chain resilience

    • Encouraging local production mitigates disruptions from global shocks (pandemics, trade wars, natural disasters).


4. Preventing “Unfair” Competition

  • Anti-dumping protection

    • When foreign producers sell below cost (dumping) to drive out competitors, imposing anti-dumping duties restores a level playing field.


  • Countervailing dutiesTariffs on subsidized imports counteract foreign government support that creates unfair low prices, protecting domestic producers.


5. Generating Government Revenue

  • Tariff revenues

    • Especially in developing countries with limited domestic tax capacity, import duties can be a reliable revenue source to fund infrastructure, education, and health services.

  • Quota‐auction proceeds

    • Governments may auction import licenses, capturing additional fiscal gains.


6. Promoting Strategic Trade

  • Supporting R&D-intensive industriesIn sectors with high fixed costs and first-mover advantages (e.g., biotechnology, aerospace), limited competition can encourage investment in innovation.

  • Capturing dynamic gainsBy temporarily sheltering emerging champions, governments can help domestic firms climb up global value chains.Questions to think about



7. Cultural and Environmental Objectives

  • Protecting cultural industriesQuotas on foreign films, books, or music can preserve local heritage and creative diversity.

  • Environmental standardsRestricting imports produced under lax environmental regulations helps uphold domestic sustainability goals.



Practical Considerations

While protectionism can deliver the above advantages, policymakers must weigh these against potential downsides (higher consumer prices, retaliatory measures, and allocative inefficiency). In practice, many nations adopt targeted, temporary, and tied-to-performance measures—phasing out protection once domestic firms reach competitiveness benchmarks.



Conclusion


Protectionist tools offer governments a degree of control to:

  • Shield strategic sectors and workers

  • Cultivate promising new industries

  • Safeguard national security

  • Address unfair trading practices

  • Raise much-needed revenue

Used judiciously and time-limited, protectionism can complement broader economic strategies, balancing the gains from global integration with domestic resilience and social objectives.



IB Economics 10-Marker Questions(Typically Section B short-answer/quantitative and data-response questions on “Advantages of Protectionism”)


  1. “Explain,” with the help of a tariff-incidence diagram, how a specific tariff on imported wheat affects consumer surplus, producer surplus, and deadweight loss in a small country.

    • Command term: Explain

    • Focus: Price paid by consumers, price received by producers, changes in surpluses and deadweight loss


  2. “Discuss” two ways in which import quotas on steel can protect domestic employment in the manufacturing sector.

    • Command term: Discuss

    • Focus: Output restrictions, firm revenues, job retention, spillover effects on related industries


  3. “Calculate and comment” on the change in government revenue if imports of aluminum fall from $20 billion to $15 billion under a 20 % tariff.

    • Command term: Calculate and comment

    • Focus: Tariff revenue before vs. after (revenue = tariff × import value), brief evaluation of fiscal significance



IB Economics 15-Marker Questions(Typically Section B longer data-response or Section C essay questions on “Advantages of Protectionism”)


  1. “Evaluate” the infant-industry argument: To what extent do temporary tariffs foster long-run competitiveness in emerging sectors?

    • Command term: Evaluate

    • Scope: Short-run protection, economies of scale, dynamic efficiency, consumer costs, deadweight loss


  2. “To what extent” do anti-dumping duties achieve their goal of preventing predatory pricing without unduly harming consumer welfare?

    • Command term: To what extent

    • Scope: Defining dumping, injury to domestic firms, effectiveness of duties, consumer price impact, WTO constraints


  3. “Assess” the role of import duties as a revenue source for developing economies, balancing fiscal needs against allocative efficiency.

    • Command term: Assess

    • Scope: Revenue stability, administrative costs, distortions in consumption/investment, alternative tax instruments



CIE 9708 Economics 13-Marker Questions(Paper 2 style extended responses for Cambridge International A-level on “Advantages of Protectionism”)


  1. “Using a diagram and data, discuss” the effects on consumer surplus, producer surplus, and deadweight loss when a small country imposes an import quota on sugar. (13 marks)

    • Command term: Discuss

    • Focus: Quota rent, shifts in supply, surplus redistribution, net welfare change


  2. “Explain and evaluate” how anti-dumping measures can restore a level playing field for domestic firms, and their wider economic implications. (13 marks)

    • Command term: Explain and evaluate

    • Scope: Mechanisms of injury, calculation of duties, impact on prices, compliance with WTO rules, consumer effects


  3. “Examine and recommend” which protectionist instrument—tariffs, quotas, or local-content requirements—would be most effective for a developing economy seeking both revenue and infant-industry growth. (13 marks)

    • Command term: Examine and recommend

    • Scope: Revenue generation, industry support, administrative feasibility, long-term competitiveness, welfare trade-offs


Use these numbered prompts to guide your revision and practice answering exam-style questions on the economic rationale and impacts of protectionist policies.



 
 
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