Economics HL · Unit 4: The Global Economy · 7 min read · Updated 2026-05-11
Protectionism — IB Economics Higher Level
IB Economics Higher Level · Unit 4: The Global Economy · 7 min read
1. 1. Definition and Types of Protectionist Measures★☆☆☆☆⏱ 10 min
**Tariffs**: Taxes levied on imported goods to raise their price relative to domestic goods
**Import quotas**: Legal physical limits on the quantity of a good that can be imported
**Domestic production subsidies**: Government payments to domestic producers to lower their production costs
**Non-tariff/administrative barriers**: Product standards, import licensing requirements, and bureaucratic delays that restrict imports
2. 2. Welfare Analysis of Tariffs and Quotas★★★☆☆⏱ 20 min
Tariffs and binding quotas both raise domestic prices above the world price, creating redistributive effects and deadweight welfare loss. IB exams consistently require you to calculate or identify changes in consumer surplus, producer surplus, government revenue and deadweight loss (DWL).
Exam tip: If asked to compare tariffs and quotas, note that tariffs give government revenue, while quotas give quota rents to private import license holders.
3. 3. Protectionism via Domestic Subsidies★★★☆☆⏱ 15 min
Unlike tariffs and quotas, subsidies do not raise domestic consumer prices above the world price. This means their welfare cost is lower than equivalent protection from a tariff.
Exam tip: IB examiners frequently ask to compare the welfare effects of tariffs and subsidies, always mention the impact on consumer prices to get full marks.
4. 4. Arguments For and Against Protectionism★★☆☆☆⏱ 15 min
**Arguments for protectionism**: Protect infant industries from foreign competition until they become competitive; protect strategic industries (food, defense, energy) for national security; prevent dumping of cheap underpriced imports; protect domestic jobs from low-wage foreign competition; raise government revenue.
**Arguments against protectionism**: Raises prices and reduces choice for consumers; leads to retaliation from other countries that reduces domestic exports; reduces competitive pressure on domestic firms, leading to lower productivity and innovation; creates deadweight welfare loss; distorts comparative advantage leading to misallocation of resources.
Common Pitfalls
Why: Students incorrectly apply the price effect of tariffs to subsidies
Why: Students confuse a transfer of surplus with a loss of total surplus
Why: Students forget that there are context-specific justifications for protectionism
Why: Students misstate the standard IB definition of dumping