Study Notes
Trade protection involves measures like subsidies and administrative barriers to shield domestic industries from foreign competition. Subsidy — a payment to firms to encourage production and lower prices. Example: Government gives money to local farmers to reduce the cost of their produce. Production subsidy — a subsidy for domestic producers to protect against imports. Example: Payment per unit produced by local manufacturers competing with imports. Export subsidy — a subsidy for domestic exporters to enhance competitiveness abroad. Example: Payment per unit exported by local companies. Administrative barriers — procedures that make importing costly and time-consuming. Example: High standards and certifications required for foreign goods.
Exam Tips
Key Definitions to Remember
- Subsidy
- Production subsidy
- Export subsidy
- Administrative barriers
Common Confusions
- Confusing production subsidies with export subsidies
- Misunderstanding the purpose of administrative barriers
Typical Exam Questions
- What is a production subsidy? A payment to domestic producers to protect against imports.
- How do export subsidies affect international trade? They make domestic exports more competitive by lowering prices.
- What are administrative barriers? Procedures that increase the cost and time for imports to enter a market.
What Examiners Usually Test
- Understanding of how subsidies affect market prices and quantities
- Ability to analyze the impact of trade protection on different stakeholders
- Knowledge of arguments for and against trade protection