Protectionism is an economic policy that protects a country’s production and jobs by imposing restrictions, limitations, or fees on goods or services imported from other countries (imports), making them less competitive with domestic goods and services.
Protectionist policies have a direct impact on the laws of competition, which are market laws that explain the direct relationship between supply and demand. However, in recent years, and within the context of a globalized world that regards protectionism as a minority trend, a conservative response has emerged that many refer to as neo-protectionism, as a result of new market forms and the global flow of money or products.
For many years, however, the major flows of international trade have been based on a free market, with few protectionist barriers. When offering freight transport services to any part of the world, large freight forwarding companies like Indochinapost take all of these factors into account.
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Certain types of protectionism
- Compensatory, it equalizes product purchase prices so that there are no significant differences between national and imported products.
- Anti-dumping creates barriers with subsidies to prevent “dumping” or sales below market value.
- Fiscal protectionism safeguards the nation’s fiscal tasks through tax collection strategies.
How do protectionist policies work?
Some measures to implement protectionist policies include:
- Duties are a method of taxing imports directly, raising the price of imported goods. As a result, they are less competitive.
- Quotas. This method limits the number of products that can be imported, preventing other countries from flooding the market with cheap products as a result of subsidies.
- Governments provide subsidies to local industries in the form of tax credits or direct payments, lowering the cost of locally produced goods and services. It is more effective than tariffs because it has the added benefit of making exports less expensive and more competitive abroad.
The Benefits and Drawbacks of Protectionism
Proponents of protectionism argue that the benefits of such measures include the improvement of the country’s strategic industries, the promotion of the domestic industrial sector, and the protection of emerging sectors.
Other experts, however, argue that a lack of competition weakens the industry in the long run because local businesses stop innovating and improving their products or services. They claim that in the long run, consumers will end up paying more for lower-quality products. Furthermore, protectionism restricts markets for domestic firms as they face similar measures from other countries, eventually slowing the country’s economic growth.
Protectionism vs. free markets
The free market or free trade is the polar opposite of protectionism. It denotes the absence of trade barriers that impede the exchange of goods and services between countries. The free market is founded on the removal of artificial barriers to international trade in goods and services. Protectionism, on the other hand, imposes measures such as tariffs, taxes, or quotas, whereas free trade eliminates them.
The state provides no subsidies, regulations, laws, or standards in a free market economy. Many experts argue that this economic doctrine improves economic activity and employment by increasing the competitiveness of companies and products.
