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2010 39www.vasantkothari.com
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Protection stands for restrictions imposed on the
import of foreign goods.
All these governmentally imposed barriers are
imposed through the political pressures of business for
protection of their markets.
2010 40
Mechanics of Protectionism
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The theoretical and logical arguments for free trade
have equal validity in all countries, yet the international
trader must face the reality
that we lives in a world of
tariffs, quotas and non-tariff
barriers.
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Mechanics of Protectionism
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Protection of Infant Domestic Industry
Conservation of Natural Resources
Protection of Home market
Need to keep Money at Home
Reduction of Unemployment
National Defence
Retaliation and Bargaining
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Mechanics of Protectionism
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An economy with strong cost advantage in
manufactured goods or having capacity to manufacture
more goods, enjoying high standard of living will prefer
free trade.
Similarly a country with a monopoly will also preferfree trade.
2010 43
Mechanics of Protectionism
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But restrictions on trade may be necessary for
developing countries to encourage its industrial
production and also to increase employment and
economic activity.
In an economy depending primarily on agriculture,protection also helps in diversification of its production
activities
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Mechanics of Protectionism
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Trade barriers may be
Tariff Barriers and
Non Tariff Barriers
or protective barriers
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Trade Barriers
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To Protect Home Industries from Foreign
Competition
To Promote New Industries and Research and
Development
To Conserve Foreign Exchange Reserves
To Maintain Favourable Balance Of Payments
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Objectives
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To Protect National Economy from Dumping
To Curb Conspicuous Consumption
To Make Economy Self-reliant
To Mobilise Public Revenue
To Counteract Trade Barriers Imposed By Other
Countries
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Objectives
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Tariff barriers have been
one of the classical
methods of regulating
international trade.
Tariffs may be referred to
as taxes on the imports.
2010 48
Tariff Barriers
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It aims at restricting the inward flow of goods from
other countries to protect the countrys own industries
by making the goods costlier in that country.
Sometimes the duty on a product becomes so steep
that it is not worthwhile importing it.
In addition, the duty so imposed also provides a
substantial source of revenue to the importing country.
2010 49
Tariff Barriers
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Tariffs may be classified according to
the purpose
Revenue Tariff- Increases Govt. revenue
Protective Tariff- protects domestic industry
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Tariff Barriers
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how they are levied.
Counter active Tariff-Similar to anti-dumping
Specific Tariff - based on per units/ Vol./
Length/number of goods
Ad valorem Tariff - based on certain
percentage of FOB/CIF value
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Tariff Barriers
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To protect the domestic
industries against unfair
competition and to give them a
fair chance of survival various
countries are adopting non-tariff
measures.
2010 52
Non Tariff Barriers
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Some of these are :
Quantity Restrictions, Quotas and Licensing
Procedures
Foreign Exchange Restrictions
Technical Regulations
Consular Formalities
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Non Tariff Barriers
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Comparison
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Regional Trade
Alliances, Markets,
and Agreements
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International Institutions by
purpose
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United Nations
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The North American Free Trade Agreement (NAFTA)
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Pacific Rim Nations
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North Atlantic TreatyOrganization (NATO)
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Collective Security Treaty Organization (CSTO)
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Association of Southeast Asian Nations (ASEAN)
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European Free Trade Agreement (EFTA)
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African Trade Agreements (ATA)
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Central American Free
Trade Agreement (CAFTA)
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Andean Community (CAN)
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ASIA-Pacific Economic Cooperation
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Organisation For Economic
Cooperation and Development
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Central American Common Market - CACM
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Caribbean Common Market - CARICOM
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2010 74
Gulf Cooperation Council (GCC)
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Rule Of Internationalization
BE COMPETITIVE!
BE PROACTIVE!