Protection

Protection can be defined as any type of government policies that give domestic producers an advantage over foreign competitors. The purpose of the government to impose a protection to their country is to prevent dumping, protection of domestic employment and infant industries. Protection policies such as tariffs, quotas and subsidies affect the global economy. This is because of the government trying to impose a protectionist barrier to foreign competitors, i.e. to reduce or stop imported goods and services from entering into the domestic market.
Dumping occurs when a foreign competitor tries to sell their goods and services in another country’s market at an incredibly low price. This will lead to local producers and firms to collapse being unable to compete at the low price. Thus, allowing foreign competitors to dominate in the domestic market.   To prevent this kind of circumstance to occur the government will use protectionist methods i.e. introducing a tariff. A tariff is a government imposed tax on imported goods for the purpose of protecting the domestic industries. Its effect is to raise prices on foreign imported goods and services in order to make domestic producers more competitive.

In the diagram shown above, the quantity of imports before tariff is QQ1. However, the quantity of imports after the tariff is reduced to Q2Q3. At price 0P the demand is at 0Q1 but as the tariff is being applied to 0P, the demand will contract to 0Q3. This will result in consumers paying higher prices and receiving fewer goods. Foreign competitors will consider lowering importing goods and services as it is not as productive as before. Hence, producing goods for foreign competitors will be very inefficient in allocating resources and affect the global economy.
One of the most popular advantages of protection is saving local jobs. If domestic producers were to be protected from competition with cheaper foreign import, this will increase the demands for domestic goods....