Protectionism Theme 4

What is a Tariff?

• An amount charged to businesses that want to export goods

• A tax placed on an import

• A fine for importing too many products

• A charge for doing business in a foreign country

Which of these is true? (more than one may be true)

• Tariffs are imposed by Governments to reduce imports

• A business can choose whether or not to pay the Tariff

• Tariffs are set by the WTO

• A Tariff will raise the price of imported products meaning consumers prefer domestic goods/services

Which of these are impacts of Tariffs? (more than one may be true)

• Tariffs can increase the number of jobs in several countries

• A foreign producer will cut production due to reduced demand on products that have a Tariff applied

• A Tariff will increase competition

• A Tariff will protect inefficient domestic industries

Why do Governments use Tariffs? (more than one may be true)

• To raise tax revenue

• To protect domestic industries from foreign competition

• To protect the environment from potentially more harmful products

• To encourage new imports into the country

Which of these is a benefit of having Tariffs?

• More imports in the country offer consumers a greater variety of choice

• Foreign firms are less likely to invest in the country to avoid paying the Tariff

• Domestic produced products are cheaper as the Tariff is not applied to them

Which of these is a drawback of Tariffs?

• Other countries may impose Tariffs of their own in response

• Greater pressure on domestic industries

• Businesses absorb the cost of the Tariff and so are less profitable

Which of these defines 'Quota'?

• A charge made by a country to prevent too many imports

• The difference between the amount a country imports and exports

• Being able to count the number of imports and exports in a country

• A physical limit of the quantity of a good imported or exported

Why are Quotas used? (more than one may be true)

• To protect jobs of domestic workers

• Because they control the number of imports more effectively than Tariffs do

• As a bargaining chip in trade negotiations with other nations

• To support the introduction of foreign goods into new markets

Which of these is a benefit of having Quotas?

• To protect the demand for domestic products

• To increase Balance of Payments

• To maintain relationships with other national governments

• Business prefer Quotas to Tariffs as there is no extra charge

How many of these are drawbacks of Quotas?

• Quotas often stay in place long after the infant industry they were designed to protect has established itself

• Use of quotas creates a domino effect of other countries imposing similar restrictions

• Quotas reduce the amount of FDI in a country

• Quotas reduce the amount of goods sold and therefore increase waste