3.1.4 Trade policy and trade negotiations
Top protectionist countries
USA
India
Russia
Protectionism
When a country takes action to protect its own industries by restricting trade with other
countries
Countries have a comparative advantage
Strong reasons for economic trade to occur
Developed and developing nations benefit in diverse ways or not at all
Methods of Trade protection
Smoot-Hawley Tariff of 1930
o Designed to protect farmers from agricultural imports from Europe
Government subsidizes local industries
o That allows producers to lower the price3 of local goods and services.
Impose quotas on imported goods
o No matter how low a foreign country sets the price through subsidies it cannot ship
more goods
Deliberate attempt by country to lower currency value
o Making exports cheaper and more competitive
o China PEG’s its currency
What Is the health of the Chinese currency?
o Chinese Yuan 0.12= £1
Dumping
Overproduction in developed countries may be released to developing countries' markets.
Undercuts domestic prices and producers
May force them out of the market
Motivations for Protectionism
Response to import dumping
Response to chronic trade gap/ deficits
Employee protection
Protect infant sectors
Protect key industries
Raise revenues for government with budget deficits
Top protectionist countries
USA
India
Russia
Protectionism
When a country takes action to protect its own industries by restricting trade with other
countries
Countries have a comparative advantage
Strong reasons for economic trade to occur
Developed and developing nations benefit in diverse ways or not at all
Methods of Trade protection
Smoot-Hawley Tariff of 1930
o Designed to protect farmers from agricultural imports from Europe
Government subsidizes local industries
o That allows producers to lower the price3 of local goods and services.
Impose quotas on imported goods
o No matter how low a foreign country sets the price through subsidies it cannot ship
more goods
Deliberate attempt by country to lower currency value
o Making exports cheaper and more competitive
o China PEG’s its currency
What Is the health of the Chinese currency?
o Chinese Yuan 0.12= £1
Dumping
Overproduction in developed countries may be released to developing countries' markets.
Undercuts domestic prices and producers
May force them out of the market
Motivations for Protectionism
Response to import dumping
Response to chronic trade gap/ deficits
Employee protection
Protect infant sectors
Protect key industries
Raise revenues for government with budget deficits
