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Discuss the arguments in favour of protectionism - NSC Economics - Question 6 - 2021 - Paper 1
Question 6
Discuss the arguments in favour of protectionism. How can South Africa benefit from trading in global markets?
Worked Solution & Example Answer:Discuss the arguments in favour of protectionism - NSC Economics - Question 6 - 2021 - Paper 1
Step 1
Discuss the arguments in favour of protectionism.
Answer
Protectionism refers to trade policies that a country implements to protect its local industries from foreign competition. The arguments in favour of protectionism include:
1. Industrial Development
Some developing countries benefit from protectionism as it helps them establish industries suitable for their economic context. By limiting foreign competition, domestic businesses can grow and establish themselves without being overshadowed by well-established foreign competitors.
2. Support for Infant Industries
Protectionism is crucial for young or emerging industries that need time to develop. These industries may not be able to compete on a level playing field initially due to their high costs and lack of market experience. By implementing protective measures, governments can provide these industries with a necessary foothold in the market.
3. Employment Maintenance
Protectionist policies can help reduce unemployment by supporting domestic industries, allowing them to maintain and potentially expand their workforce. When local industries thrive, job opportunities increase, benefiting the overall economy.
4. Preventing Dumping
Dumping occurs when countries sell products at a price lower than the cost of production, often to gain market share. Protectionist policies can prevent dumping, thereby safeguarding local businesses from practices that could drive them out of the market.
5. Economic Self-sufficiency
Countries that adopt protectionism can better control their resources and become less dependent on foreign goods. This strategy enhances national security and promotes economic stability, especially in times of global uncertainty.
6. Stabilisation of Exchange Rates
Protectionist measures can assist in stabilising a country’s currency and balance of payments, which is critical for maintaining economic stability. Fluctuations in trade can be controlled, leading to a more predictable economic environment.
7. Environmental Considerations
Protectionism can also encourage industries to adopt more sustainable practices. When local products are prioritized, the environmental costs associated with transporting goods across long distances may be reduced, promoting greener alternatives.
Step 2
How can South Africa benefit from trading in global markets?
Answer
South Africa can derive several benefits from engaging in global trade:
1. Expanding Market Access
By trading in global markets, South African businesses can sell their products to a larger audience, which can significantly increase their sales and revenues.
2. Improved Quality and Standards
Competition from foreign products often compels local businesses to improve the quality of their goods and services to meet international standards, enhancing consumer satisfaction.
3. Innovation and Efficiency
Exposure to global competition encourages domestic companies to innovate and streamline their operations, leading to improved efficiency and productivity.
4. Diversification of Markets
Trade allows South Africa to diversify its economic relationships and reduce reliance on a limited number of trading partners, which can safeguard the economy against local market fluctuations.
5. More Job Opportunities
Increased trade can lead to the expansion of industries and the creation of new job opportunities. This can help lower unemployment rates in South Africa.
6. Economic Growth
Through enhanced trade relationships and increased foreign exchange earnings, South Africa can experience overall economic growth, which can improve the living standards of its citizens.