Discuss the Tools of International Trade Protectionism Policy Implemented by a Nation
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Goods and services do not flow freely among countries, even among countries with excellent relations. So, countries put up barriers to trade for a number for reasons. This is called the international trade protectionism policy.
By protecting the international trade, barrier such as tariffs are used. Tariffs are taxes on imports. It can be either specific, for example per unit, or ad valorem, which is a percentage of the price. Tariffs also used for revenue purpose. By using tariffs to raise import prices, domestic producers can be protect from foreign competition because consumers will choose to buy domestic products that have lower price, so the domestic economy will increase.
Besides, import quotas are used to protect international trade. Import quotas specify the maximum of imports allowed in a certain period of time. Low import quotas are more effective compare with tariffs, because tariffs do not limit the amount of goods entering a country. Differs from tariffs, import quotas do not generate any revenue for the government, higher prices only results in more revenue per unit for the foreign producers.
Embargoes are one of the tools of international trade policy. Embargo is a ban placed on export and import products or on trade with particular countries. Embargoes will be used on imports of particular countries due to political reasons or some moral reasons.
Furthermore, the exchange controls. Exchange controls are used to prevent excessive spending on imports. By using exchange controls, limits are set up on the dealings in foreign currencies that a country’s citizens can make. When importers are limited in their access to foreign currencies, import will fall due to they cannot afford the payment of total import’s value.
Lastly, Export subsidies. Domestic industries are given export subsidies to increase the supply on the world market, which will result in reducing the