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Economics IGCSEPDF 112
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Protecting infant industries.
Protecting strategic industries (defence, food security).
Preventing dumping (selling abroad below cost).
Safeguarding employment and reducing trade deficits.
The foreign exchange rate is the price of one country’s currency in terms of another
currency.
● Use of trade barriers to protect domestic producers from foreign competition.
● Common methods:
(taxes on imports), import quotas, subsidies (to domestic
firms),
(ban on trade) and voluntary export restraints.
● Higher prices for consumers, resources diverted to inefficient industries, risk of retaliation
from trading partners, loss of welfare gains.
Definition
Consequences of protection
tariffs
embargoes
Reasons for protection
Determination of exchange rates
6.3 Foreign Exchange Rates