Slide 2:
Plan for protectionist essay Definitions - BoP and protectionist policies Firstly what will happen in theory Use the tariff diagram as an example to show a drop in exports to countries that are employing protectionist policies Make sure you fully analyse (explain the movements in the diagram – mainly the drop in imports to that country/the drop in exports from the UK) Mention that the affect on the UK BoP will depend on the size of the tariff Then use the AD/AS diagram to show the effect on all of the four macro objectives of the reduction in exports (X) Make sure you fully analyse (explain the movements in the diagram) Decrease in AD causes decrease in inflation, employment and growth Mention deindustrialisation in the long run Make sure you talk about the affect on the interest rate Floating exchange rate means the pound may depreciate due to lack of demand This means that in the long term the BoP may improve (depending on the Marshall Lerner condition) However WIDEC so imports may cause cost push inflation
Slide 3:
Now talk about what will happen in reality UK is part of the EU customs union which has an agreement to have no protectionist policies – It does 60% of its trade with the EU so protectionism will not have such a significant affect The UK is a member of the WTO (explain what this is) and most of its trade partners are also part of the WTO. This means that they may not face too much protectionism If they do this may cause issues and trade wars that will be damaging in the long run Conclusion What do you think will happen and what is the main reason for that – directly answer the question In theory, it could be damaging for the UK economy with lower growth and unemployment issues although that really depends on the size of the protectionist policy e.g. the size of the tariff. However, in reality, there it is unlikely to be a significant impact due to the fact that the majority of trade is done with Europe