# Understanding Protectionism: Tools and Examples for Trade Policies

## What Is Protectionism?

Protectionism involves government strategies designed to limit international trade to bolster domestic industries. These policies aim to enhance economic activity within a domestic market and address concerns related to safety and product quality. While protectionism is debated, its supporters claim it fosters job creation and boosts GDP by shielding homegrown businesses from global competition.

### Key Takeaways

*   Protectionism involves government policies that restrict international trade to support domestic industries, often by imposing tariffs, quotas, and subsidies.
*   Import tariffs can be scientific, peril point, or retaliatory, each affecting the cost of foreign goods to benefit domestic markets.
*   Import quotas limit the quantity of products entering a country, protecting local industries and preventing practices like dumping.
*   Product standards and safety regulations can be used to control the quality of imports, favoring higher local production.
*   Government subsidies can either directly support domestic businesses or indirectly aid them through financial incentives to boost exports.

![Protectionism: Government policies that restrict international trade to help domestic industries.](https://www.investopedia.com/thmb/OeOJ6oyhRVsU6zxLln_xb-moyfo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Protectionism-FINAL-112a474bf8d642cd8a9b497813e24933.png)

*— Jiaqi Zhou / Investopedia*

## Deep Dive Into Protectionism: Pros and Cons

Protectionist policies usually target imports but can also affect product standards and government [subsidies](https://www.investopedia.com/terms/s/subsidy.asp) in international trade.

The merits of protectionism are the subject of fierce debate. Critics say protectionism can hurt those it aims to protect by slowing economic growth and raising inflation, suggesting [free trade](https://www.investopedia.com/terms/f/free-trade.asp) as a better option. Supporters of protectionism claim it creates domestic jobs, boosts [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp), and enhances global competitiveness.

## Key Protectionist Tools: Tariffs, Quotas, and More

### The Role of Tariffs in Protectionism

Import [tariffs](https://www.investopedia.com/terms/t/tariff.asp) are a key tool for enacting protectionist policies. Three main [countervailing import tariff](https://www.investopedia.com/terms/c/countervailingduties.asp) concepts are used as protective measures. In general, all forms of import tariffs are charged to the importing country and documented at government customs. Import tariffs raise the price of imports for a country.

Scientific tariffs are import tariffs imposed on an item-by-item basis, raising the price of goods for the importer and passing on higher prices to the end buyer. Peril point import tariffs are focused on a specific industry.

These tariffs involve the calculation of the levels at which point tariff decreases or increases would cause significant harm to an industry overall, potentially leading to the jeopardy of closure due to an inability to compete. Retaliatory tariffs are imposed in response to high duties charged by trading partners.

### Import Quotas: Limiting Foreign Competition

Import [quotas](https://www.investopedia.com/terms/q/quota.asp) are [nontariff barriers](https://www.investopedia.com/terms/n/nontariff-barrier.asp) that limit the number of products imported over a specific time. Quotas aim to limit the supply of specific products from an exporter to an importer. This is typically a less drastic action that has a marginal effect on prices and leads to higher demand for domestic businesses to cover the shortfall.

Quotas may also help prevent [dumping](https://www.investopedia.com/terms/d/dumping.asp), where foreign producers export goods below production costs. An [embargo](https://www.investopedia.com/terms/e/embargo.asp), in which the importation of designated products is completely prohibited, is the most severe type of quota.

### Product Standards: Ensuring Safety and Quality in Trade

Product safety and low-quality products or materials are typically top concerns when enacting product standards. Product standard protectionism can be a barrier that limits imports based on a country’s internal controls.

Some countries may have lower regulatory standards in the areas of food preparation, [intellectual property](https://www.investopedia.com/terms/i/intellectualproperty.asp) enforcement, or materials production. This can lead to a product standard requirement or a blockage of certain imports due to regulatory enforcement. Implementing product standards can boost domestic production by restricting imports.

For example, consider French cheeses made with raw instead of pasteurized milk, which must be aged for at least 60 days before being imported to the United States. Because the process for producing many French cheeses involves aging for 50 days or less, some of the most popular French cheeses are banned from the U.S., providing an advantage for U.S. producers.

### Government Subsidies: Supporting Domestic Industries

Government subsidies can be either direct or indirect. Direct subsidies provide businesses with cash payments. Indirect subsidies come in the form of special savings such as interest-free loans and tax breaks.

Governments might offer direct or indirect subsidies in areas like production, employment, and taxes.

When seeking to boost a country’s balance of trade, a country might also choose to offer subsidies to businesses for exports. Export subsidies provide an incentive for domestic businesses to expand globally by increasing their exports internationally.

## What Are Examples of Protectionism?

Common examples of protectionism, or tools that are used to implement a policy of protectionism, include tariffs, quotas, and subsidies. All of these tools are meant to promote domestic companies by making foreign goods more expensive or scarce.

## Is Protectionism Left-Wing or Right-Wing Politics?

Traditionally, protectionism is a left-wing policy. Right-wing politics generally support free trade, which is the opposite of a protectionist stance. Left-wing politics support economic populism, of which protectionism is a part.

## What Are the Arguments for Protectionism?

Lawmakers who favor protectionist trade policies believe that they protect jobs at home, help support and grow small companies and industries, and provide a layer of security to the nation.

## The Bottom Line

Governments use quotas and tariffs to shield domestic businesses from foreign competition. This may help domestic businesses but can lead to higher consumer prices and strained international relations.

> **Article Sources**
>
> 1.  U.S. Food & Drug Administration. “[Joint FDA / Health Canada Quantitative Assessment of the Risk of Listeriosis from Soft-Ripened Cheese Consumption in the United States and Canada: Report](https://www.fda.gov/media/90488/download),” Page 88 (Page 103 of PDF).