Theory question 108
International Trade(a) What is protective tariff?
(b) Outline any four reasons in favour of protective tariff.
(c) State any two reasons against protective tariff.
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(a) A protective tariff is a tax on imported goods meant to make them dearer so that local industries producing similar goods are protected from foreign competition.
(b) Any four: protects infant industries; reduces imports and corrects balance of payments deficit; prevents dumping; creates employment; encourages self-reliance and diversification; protects strategic industries; raises revenue.
(c) Any two: higher prices for consumers; local firms may stay inefficient; retaliation by other countries; reduces consumer choice; encourages smuggling; reduces gains from specialisation.
Protection helps local producers but costs consumers.