Question

Who does protectionism protect? From what does it protect them?

Short answer

Protectionism protects domestic industries, businesses, and workers from threats such as cheap foreign imports, foreign competition, predatory pricing, fluctuating exchange rates, and cultural erosion. It achieves this by implementing measures like tariffs, import quotas, and subsidies to restrict trade and promote local economic growth.

Step-by-step solution

Define Protectionism

Protectionism is an economic policy in which a country implements measures, such as tariffs, import quotas, and subsidies, to restrict trade with other countries and protect its domestic industries from foreign competition. It is often implemented to support local businesses and maintain economic stability.

Identify the Parties Protected by Protectionism

Protectionism is primarily aimed at protecting domestic industries, businesses, and workers. By implementing protectionist measures, a country seeks to create an environment in which its domestic industries can thrive, preserving jobs and promoting economic growth.

Explain the Threats Protectionism Shields Against

Protectionism protects domestic industries from various threats, including: 1. Cheap foreign imports: By imposing tariffs and import quotas, protectionist policies make foreign products more expensive, thus reducing their competitiveness in the local market. This allows domestic industries to maintain higher prices and profit margins, while sustaining production and employment levels. 2. Foreign competition: Foreign companies may have access to cheaper labor, materials, and technologies, allowing them to produce goods and services at lower costs. Protectionism shields domestic industries from such competition, helping to preserve market share and secure jobs within the local economy. 3. Predatory pricing: Some foreign businesses may intentionally lower their prices to drive domestic competitors out of the market. Once the competition is eliminated, they may then raise prices to monopolistic levels. Protectionism helps prevent this practice, ensuring fair competition and safeguarding domestic industries. 4. Fluctuating exchange rates: Changes in the exchange rate can significantly impact the competitiveness of domestic industries. If a country's currency appreciates, its exports become more expensive in foreign markets, while imports become cheaper. Protectionist measures help mitigate the impact of currency fluctuations on domestic industries. 5. Cultural preservation: Protectionism can also serve to protect local culture and identity by safeguarding domestic industries that produce goods and services with cultural significance. In summary, protectionism aims to protect domestic industries, businesses, and workers from various threats, including cheap foreign imports, strong competition, predatory pricing practices, fluctuating exchange rates, and the erosion of cultural identity. By understanding the concept of protectionism and its implications, we can better evaluate the merits and drawbacks of protectionist policies in different economic contexts.