Syllabus Topic
HSC Topic One - The Global Economy
Protection
methods of protection and the effects of protectionist policies on the domestic and global economy - tariffs, subsidies, quotas, local content rules, export incentives
Protectionist policies are tools used by governments to shield domestic industries from foreign competition. These measures include tariffs, subsidies, quotas, local content rules, and export incentives. While they aim to bolster local economies, they often have ripple effects on the global economy, influencing trade dynamics, economic growth, and international relations.
Methods of Protection
Tariffs: Tariffs are taxes imposed on imported goods, making them more expensive and less competitive compared to domestic products. For example, in 2025, the United States implemented a 25% tariff on Australian steel imports to safeguard its domestic steel industry. While this policy aims to help strengthen U.S. manufacturers, it has raised prices for steel-dependent industries and put a strain on U.S.-Australia trade relations.
Subsidies: Governments provide financial support to domestic industries through subsidies, enabling them to produce goods at lower costs. In Australia, subsidies for the fossil fuel industry reached approximately $14.5 billion in the 2023-2024 fiscal year, a 31% increase from the previous year. This support aimed to sustain local energy production but drew criticism for its environmental implications and the fact that handouts are being given to some of Australia’s most profitable companies. Subsidies have also further increased in the 2024-2025 fiscal year.
Quotas: Import quotas limit the quantity of specific goods that can enter a country. For example, Australia maintains quotas on agricultural products like bananas to protect local farmers from international competition. While this policy supports domestic agriculture, it can lead to higher prices for consumers.
Local Content Rules: These rules require a certain percentage of goods or services to be sourced locally. In 2023, the Australian government had planned to introduce local content quotas for streaming services, mandating that a portion of their revenue be invested in Australian-made content. This policy would have aimed to promote the domestic film and television industry, ensuring that Australian stories and culture remained prominent in the digital age.
Export Incentives: Export incentives encourage domestic producers to sell goods abroad by offering tax breaks or financial assistance. For example, Brazil’s export incentives for its agricultural sector help enhance its global competitiveness. Brazilian farmers have great access to international markets but have also intensified competition for other exporting nations.
Overall Effects of Protectionist Policies
Protectionist policies can have mixed effects on domestic and global economies. Domestically, they can safeguard jobs, promote industrial growth, and reduce dependency on imports. However, they may also lead to inefficiencies, higher consumer prices, and retaliation from trading partners.
Globally, protectionism can disrupt trade flows, hinder economic integration, and escalate tensions between nations. For instance, the US-China trade war, marked by reciprocal tariffs, has had lasting impacts on global supply chains and economic stability.
In 2025, the resurgence of protectionist measures in response to economic uncertainties highlighted the delicate balance between protecting domestic interests and fostering global cooperation. While these policies can provide short-term relief, their long-term implications require careful consideration to avoid adverse effects on the interconnected global economy.
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