Protectionism is the discouraging of imports by, for example, raising tariff barriers and imposing quotas in order to favor local producers. It is rife in agriculture.
Different Tools of Protectionism in International Business
Protectionists adopt different measures to protect their business. Protectionists measures include the following tools:
Tariffs or customs duties: A tax on imports where the importer is required to pay either a percentage of the value of the imported good (an ad valorem duty), or per unit of the good imported (a specific duty).
Non-tariff barriers: Restrictions on the quantity of product allowed to be imported into a country. The restrictions can be imposed by import licences (in which case the government gets additional revenue) or simply by granting the right to import only to certain producers.
Minimum local content rules: A specified minimum local content of products should be made in the country or region in which they are sold to qualify as being ‘home made’ and so avoid other restrictions on imports. This leads manufacturers to set up factories in the country.
Minimum prices and anti-dumping action: To stop the sale of a product in an overseas market at a price lower than charged in the domestic market, anti-dumping measures including establishing quotas, minimum prices or extra excise duties are used
Embargoes: A total ban or zero quota.
Subsidies for domestic producers: Financial help and assistance from government departments that give the domestic producer a cost advantage over foreign producers in export as well as domestic markets.
Exchange controls and exchange rate policy: Regulations designed to make it difficult for importers to obtain the currency they need to buy foreign goods.
Unofficial non-tariff barriers: Administrative controls such as slow inspection procedures or changing product standards which are hard for foreign suppliers to anticipate and respond to.
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