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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 economic policies that restrict imports from foreign countries to protect local industries.
Arguments in Favor of Protectionism
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Industrial Development: Protectionism can foster the growth of certain industries that may not thrive under free trade conditions. Developing countries often require protection to nurture emerging industries, allowing them to compete on a global scale eventually.
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Support for Infant Industries: New industries may struggle to survive against well-established foreign competitors. Protectionist measures can help these industries gain a foothold, enabling them to mature and take advantage of economies of scale.
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Stable Wage Levels and High Standards of Living: A country that imposes protectionist measures can maintain higher wage levels, thus ensuring that the standard of living for its workers is not adversely affected by cheaper foreign labor.
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Job Creation: Implementing protectionist policies can lead to increased domestic employment as local industries expand to meet market demands that were previously fulfilled by imports.
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Preventing Dumping: Countries may engage in dumping, where they sell products at lower prices to remove local competition. Protectionism helps prevent this and protects domestic producers from being undermined.
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Economic Self-Sufficiency: In times of crises, such as wars or economic depression, protectionism can help a country achieve self-sufficiency by ensuring that essential industries remain operational.
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Stabilizing Exchange Rates and Balance of Payments: Protectionist policies can help stabilize a country’s currency and its balance of payments by controlling the amount of imports and exports, reducing trade deficits.
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Protection of Natural Resources: Protecting industries enables sustainable management of natural resources, ensuring that they are not exploited excessively.
Conclusion
Overall, protectionism can play a crucial role in nurturing local industries, sustaining jobs, and enhancing economic stability, provided it is implemented judiciously.
Step 2
How can South Africa benefit from trading in global markets?
Answer
South Africa stands to gain significantly from engaging in global trade. The benefits include:
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Increased Production and Sales: South African businesses can expand their market reach by selling products to larger, international audiences.
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Improvement in Quality: Exposure to international standards can compel local businesses to enhance the quality of their products and services, fostering innovation and competitiveness.
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Access to Diverse Markets: South African consumers benefit from a broader selection of goods and services, leading to better prices and quality.
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Job Opportunities: Increased trade can create new job opportunities in various sectors as businesses expand and innovate to meet global market demands.
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Foreign Investment: Enhanced trade relationships can attract foreign investment into South Africa, strengthening economic growth and development.
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Foreign Exchange Earnings: Trade allows South Africa to earn foreign currency, which can be reinvested into the economy to support various sectors such as technology and infrastructure.
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Strategic Industry Specialization: South Africa can focus on producing goods where it has a competitive advantage, thereby improving efficiency and productivity.
Conclusion
Trading in global markets can provide numerous advantages for South Africa, leading to a more dynamic economy and improved standards of living.