IGCSE,Economic Development - Millennium Goals

Goal 1: Eradicate extreme poverty and hunger

Target: Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day

• Income share held by lowest 20 percent
• Malnutrition prevalence, weight for age (percent of children under 5)
• Poverty headcount ratio at $1.25 a day (PPP) (percent of population) - Four out of every five people living in extreme poverty will live in sub-Saharan Africa and Southern Asia.
• Prevalence of undernourishment (percent of population)

% of population living on less than $1.25 a day	1990	2008
Sub-Saharan Africa	56	47
Southern Asia (including India)	52	26
South-Eastern Asia	45	17
China	60	13
Latin America and the Caribbean	12	6
Developing regions (excluding China)	41	28

There has been clear progress in reducing the scale of extreme poverty The proportion of people living on less than $1.25 a day fell from 47 per cent in 1990 to 24 per cent in 2008—a reduction from over 2 billion to less than 1.4 billion. That said the rate of extreme poverty reduction has slowed down because of the impact of the global recession post 2008 and the effects of high world food and energy prices. By 2015, well over one billion people will live in extreme poverty; 4/5ths of these people will live in Sub-Saharan Africa and Southern Asia.

Those countries that have made most rapid progress towards the first of the MDGs—to halve those living in extreme poverty by 2015—have been fast growing countries of East Asia, most notably India, China and Vietnam. The proportion of people living on less than $1.25 a day fell from 43.1% in 1990 to 22.2% in 2008

To fight extreme poverty the World Bank in 2012 reported that five key areas need to be given extra focus.

Goal 2: Achieve universal primary education

Target: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling. More than half of all out-of-school children are in sub-Saharan Africa.

• Literacy rate, youth total (percent of people ages 15–24)
• Primary completion rate, total (percent of relevant age group)
• School enrolment, primary (percent net)

Progress has been made in lifting school enrolment rates for primary and secondary education although the pace of improvement has slowed in recent years. In developing regions, the enrolment rate for children of primary school age rose from 82 to 90 per cent between 1999 and 2010.

There was a steep rise for Sub-Saharan Africa with enrolment rates jumping from 58% to 78% despite a rise in the size of the primary school age population. 70% of pupils completed their primary education but more progress is needed to address the percentage of girls who are out of school – this links to the MDG goal which focuses on gender opportunities. Only six African countries recorded primary completion rates of 90 percent and above in 2009.

Goal 3: Promote gender equality and empower women

Target: Achieve full and productive employment and decent work for all, including women and young people

Target: Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015

• Proportion of seats held by women in national parliament (percent) - now there are 8,716 women parliamentarians globally, which is 19.25% of the total number of MPs
• Ratio of girls to boys in primary and secondary education (percent) - The ratio between the enrolment rate of girls and that of boys grew from 91 in 1999 to 97 in 2010 for all developing regions
• Ratio of young literate females to males (percent ages 15–24)
• Share of women employed in the non-agricultural sector

Gender parity index for enrolment in different stages of education (Data is for 2010), Girls per 100 boys	Developed Regions	Developing Regions
Primary Education	99	97
Secondary Education	99	96
Tertiary Education	120	98

Factors affecting gender disparities in secondary school enrolment rates

Goal 4: Reduce child mortality

Target: Reduce by two thirds, between 1990 and 2015, the under-five mortality rate

• Immunization, measles (percent of children ages 12–23 months)
• Mortality rate, neonatal (death in first month after birth, per 1,000 live births)
• Mortality rate, infant (per 1,000 live births)
• Mortality rate, under-5 (per 1,000)

Under-five mortality rate, 1990 and 2010 (Deaths per 1,000 live births)	1990	2010
Sub-Saharan Africa	174	121
Southern Asia	117	66
South-Eastern Asia	71	32
Latin America and the Caribbean	54	23
Developed regions	15	7
Developing regions	97	63

There has been a 35 per cent drop in child mortality rates and despite population growth, the number of under-five deaths worldwide fell from more than 12 million in 1990 to 7.6 million in 2010. Sub-Saharan Africa has experienced a 2.4% annual fall. Despite this progress there are several areas of crucial concern:

• Death rates in the first month after birth have risen in the last ten years
• There are big disparities in infant survival rates between rich and poor households and between families where the mother has an education and where she does not
• Nearly one in five children under age five in the developing world is underweight
• In the world's poorest countries every 2 minutes a woman dies from complications of childbirth

Goal 5: Improve maternal health

Target: Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio

• Births attended by skilled health staff (percent of total)
• Maternal mortality ratio (modelled estimate, per 100,000 live births)

Maternal mortality, (Maternal deaths per 100 000 live births, women aged 15-49)	1990	2010
Sub-Saharan Africa	850	500
Southern Asia	590	220
South-Eastern Asia	410	150
The Caribbean	290	190
Latin America	130	72
Developed regions	26	16
Developing regions	440	240

In 2010, 32 women per hour died as a result of giving birth. The global burden of maternal death has fallen sharply with a reduction of 47 per cent since 1990 – but the maternal mortality ration in developing regions was still 15 times higher than in developed regions. One in ten maternal deaths in Sub-Saharan Africa was attributed to the effects of HIV-aids. There has been a ten per cent rise over twenty years in the percentage of birth deliveries attended by skilled doctors, nurses or mid-wives (65% in 2010) but this figure drops to less than half in Southern Asia and Sub-Saharan Africa.

Factors behind improving maternal health outcomes:

Goal 6: Combat HIV/AIDS, malaria, and other diseases

Target: Have halted by 2015 and begun to reverse the spread of HIV/AIDS

• Contraceptive prevalence (percent of women ages 15–24)
• Incidence of tuberculosis (per 100,000 people)
• Prevalence of HIV, female (percent ages 15–24), total (percent of population ages 15–49)

HIV / AIDS

• At the end of 2010, 6.5 million people were receiving antiretroviral therapy for HIV or AIDS in developing regions. The incidence of new HIV infections per year per 100 people aged 15-49 in 2010 was highest in Sub-Saharan Africa (0.41) and Southern Africa (1.08). For developing regions the incidence of HIV has fallen from 0.09 in 2001 to 0.07in 2010.
• Limited progress has been made in reducing new HIV infections, but there is better news on increasing life expectancy because of the wider availability and lower cost of using life-saving antiretroviral therapy. The price of antiretroviral treatment has fallen in the past decade: from $10k per person per year in 2000 to $100 in 2011. Young people aged between 15-24 years account for 40% of all new adult HIV infections. Infection rates in young women 15–24 years old are twice as high as among men of the same age

Malaria

An estimated 655,000 malaria deaths occurred in 2010, of which 91 per cent were in Africa and 86 per cent were children under 5 years of age. Major progress has been made in cutting malaria partly due to increased international funding and the wider adoption of insecticide-treated ben nets. There are worries however that resistance levels to some malaria drugs may be weakening.

Goal 7: Ensure Environmental Sustainability

Target: Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources

• CO2 emissions (metric tons per capita), GDP per unit of energy use
• Forest area (percent of land area), Nationally protected areas (percent of total land area)
• Increase resilience to the effects of climate change - Studies show that the poor of the world are exposed to much greater risk from natural hazards
• Improved water source (percent of population with access) - the proportion of people using an improved water source rising from 76 per cent in 1990 to 89 per cent in 2010.
• Improve sanitation - nearly half of the population in developing regions—2.5 billion—still lacks access to improved sanitation facilities at the end of 2011

One of the pressing issues with this goal is the target to improve access to clean water and sanitation:

• Eleven per cent of the global population—783 million people—remains without access to an improved source of drinking water and, at the current pace, 605 million people will still lack coverage in 2015. Rural water shortages continue to stay well above that for urban residents
• The MDG target on sanitation is unlikely to be met by 2015. Sanitation coverage increased from 36 per cent in 1990 to 56 per cent in 2010 in the developing regions as a whole. But over 2.5 billion people in developing countries still do not have access to improved sanitation facilities. 15% of the global population have no sanitation facilities at all.

Goal 8: Develop a global partnership for development

• Aid per capita (current US$)
• Telephone lines (per 100 people), mobile cellular subscriptions (per 100 people)
• Internet users (per 100 people), personal computers (per 1,000 people)
• Unemployment, youth total (percent of total labour force ages 15–24)

There are separate chapters on the economics of aid, telecommunications and development and the economics of unemployment in developing countries.

Elephant attack in kerala

https://www.google.mv/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCUQtwIwAQ&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DwT0E5oYqV1w&ei=KQYIVLfrEdeXuAS7tIGwCw&usg=AFQjCNFxtZJdxQxJHwDY-VAYhPhBsT0Riw&bvm=bv.74649129,d.c2E

Modi's Japan visit 2014

Modi's Japan visit 2014: Prime Minister describes Japan trip as very successful

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(PM hopes India's infrastructure…)

TOKYO: Prime Minister Narendra Modi today termed hisJapan trip as "very successful" and hoped that India's infrastructure will improve and the country will become clean with the help of $35 billion promised by Japan over five years, the highest ever amount ever.

Winding up his official programme on the penultimate day of his five-day visit, Modi expressed gratitude to Japan for reposing "trust" in India and demonstrating its friendship with a quip "yeh fevicol se be zyada mazboot jod hai (this bond is stronger than that of fevicol)".

This visit has been very successful," Modi said at the Indian community reception hosted in his honour here.

"There has been talk about billions and millions. But there has never been talk of trillions," he said, referring to 3.5 trillion Yen ($35 billion or 2,10,000 crore) promised by Japan to India through public and private fundingover the five years for various works, including building of smart cities and cleanup of the Ganga river.

"This is a big achievement. My biggest happiness is that Japan trusted us," he said at his last official programme after a hectic day of events and meetings.

Talking in the context of trust, he referred to Japan's decision yesterday to lift ban on six Indian entities, including HAL. The ban had been imposed in the aftermath of 1998 nuclear tests.

Referring to signing of an MoU under which Varanasi will be cleaned up and developed learning from the experience of Japanese 'smart city' Kyoto, Modi said, "we can learn from each other".

crocodail attack

Direct versus Indirect Taxation

Direct versus Indirect Taxation

Direct taxes – are paid directly to the Exchequer by the individual taxpayer – usually through “pay as you earn”. Tax liability cannot be passed onto someone else

Indirect taxes – include VAT and a range of excise duties on oil, tobacco, alcohol. The supplier can pass on the burden of an indirect tax to the final consumer – depending on the price elasticity of demand and supply for the product.

Arguments For Using Indirect Taxation	Arguments Against Using Indirect Taxation
Changes in indirect taxes can change the pattern of demand by varying relative prices and thereby affecting demand (e.g. an increase in the real duty on petrol)	Many indirect taxes make the distribution of income more unequal because indirect taxes are more regressive than direct taxes
They are an instrument in correcting for externalities – indirect taxes can be used as a means of making the polluter pay and “internalizing the external costs” of production and consumption	Higher indirect taxes can cause cost-push inflation which can lead to a rise in inflation expectations
Indirect taxes are less likely to distort the choices that people have to between work and leisure and therefore have less of a negative effect on work incentives.	If indirect taxes are too high – this creates an incentive to avoid taxes through “boot-legging” – e.g. the booze cruises to France where duty on alcohol and cigarettes is much lower.
Indirect taxes can be changed more easily than direct taxes – this gives policy-makers more flexibility. Direct taxes can only be changed once a year at Budget time	Revenue from indirect taxes can be uncertain particularly when inflation is low or there is a recession causing a fall in consumer spending
Indirect taxes are less easy to avoid, often people are unaware of how much in duty and other spending taxes they are paying	There is a potential loss of welfare from duties e.g. loss of producer & consumer surplus
Indirect taxes provide an incentive to save savings help to provide finance for capital investment	Higher indirect taxes affect households on lower incomes who are least able to save
Indirect taxes leave people free to make a choice whereas direct taxes leave people with less of their gross income in their pockets	Many people are unaware of how much they are paying in indirect taxes – they may be taxed by stealth – this goes against one of the basic principles of a tax system – that taxes should be transparent

The Tax Base

• The tax base refers to the number of tax-paying agents in the economy and the amount of income, wealth and spending on which taxes are applied
• When an economy is expanding, so does the tax base. There are more people in work, businesses are growing and making more profits. And both prices and incomes tend to rise, all of which leads to a rise in tax revenues flowing into the Treasury
• The reverse happens during a recession. Indeed one of the features of the recession has been the slump in tax income for the UK government – a feature of the downturn that has contributed hugely to the rising budget deficit.

Fiscal Drag

• Fiscal drag occurs when tax allowances do not rise in line with prices and incomes
• The result is that people and businesses end up paying a larger percentage of their incomes in tax and revenues to the government can rise quickly.

Tax competition between nations

• Tax competition describes a process where a national government decides to use reforms to the tax system as a deliberate supply-side strategy aimed at attracting new capital investment and jobs into their economy.
• The issue has become important in the European Union because some countries including France and Germany complain that poorer countries are using tax competition as an incentive to attractinward investment, yet they are also net recipients of EU structural funds.
• If these countries can afford to lower business taxes, can they also afford not to do with the extra EU funding that helps to finance, for example, infrastructural spending required sustaining fast rates of economic growth?
• During the 2010 financial crisis in Ireland, some countries were putting pressure on Ireland to cut their low corporation tax rate of 12% as price for their emergency bail-out. Ireland refused to do this.

Flat Rate Taxes

A ‘flat tax’ means that everyone is taxed at just one rate. I.e. everyone pays the same percentage tax on any income earned above the tax threshold. Examples of countries that have moved towards flat rate tax systems include Estonia, Latvia, Poland, Lithuania, Russia, Slovakia and Hungary. Supply-side economists are often fans of flat rate taxes because they think that they will

1. Help reduce red tape and reduce the resources wasted on tax forms, chasing up non-payers and enforcing tax laws. This would reduce the money spent on administering the tax system.
2. Boost incentives for people to work, to save (e.g. for retirement) and for companies to use profits to invest - both of which could increase the country’s potential growth rate.
3. Generate increased tax revenue – based on the idea of the Laffer Curve
4. A flat tax may make an economy more attractive to foreign investment.

Arguments against

1. Flat rate taxes are no longer progressive and so the distribution of income and wealth will be more unequal – certainly in the short and medium term.
2. Flat taxes can form part of a “race to the bottom” with governments competing with each other to offer the lowest rates of tax to entice inward investment and skilled workers.
3. If tax rates are cut, some people may choose to work less because they can earn the same income from working fewer hours.
4. There is no guarantee that businesses will engage in more investment and R&D if company taxes are lower – they may simply offer more in the way of dividends to their shareholders!

Globalisation - Gains, Risks & Disadvantages

China stimulates innovation in the West
Apple’s iPhone and iPad were both designed and prototyped in California and then produced in China. Chinese manufacturing competition is increasingly capturing low-skill production while simultaneously fostering high-skill innovation in the West.
About 15 percent of technical change in Europe in the past decade can be attributed directly to competition from Chinese imports, an annual benefit of almost €10 billion to European economies. Firms have responded to the threat of Chinese imports by increasing their productivity—adopting better IT, boosting R&D spending, and increasing patenting.

Source: Von Reenan & Bloom. LSE

Gains from Globalisation

Globalisation can lead to improvements in efficiency and gains in economic welfare.

Trade enhances the division of labour as countries specialise in areas of comparative advantage

Deeper relationships between markets across borders enable and encourage producers and consumers to reap the benefits of economies of scale

Competitive markets reduce monopoly profits and incentivize businesses to seek cost-reducing innovations and improvements in what they sell

Gains in efficiency should bring about an improvement in economic growth and higher per capita incomes. The OECD Growth Project found that a 10 percentage-point increase in trade exposure for a country was associated with a 4% rise in income per capita

Globalisation has helped many of the world’s poorest countries to achieve higher rates of growth and reduce the number of people living in extreme poverty

For consumers globalisation increases choice when buying goods and services and there are gains from a rapid pace of innovation driving dynamic efficiency benefits

Risks and Disadvantages from Globalisation

Globalisation is not an inevitable process and there are risks and costs:

1. Inequality: Globalisation has been linked to rising inequalities in income and wealth. Evidence for this is a rise in the Gini-coefficient and a growing rural–urban divide in countries such as China,India and Brazil.
2. Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Food price inflation (known as agflation) has placed millions of the world’s poorest people at great risk.
3. Macroeconomic instability: A decade or more of strong growth, low interest rates, easy credit in developed countries created a boom in share prices and property valuations. The bursting of speculative bubbles prompted the credit crunch and the contagion from that across the world in from 2008 onwards. This had negative effects on poorer & vulnerable nations.
4. In 2007-08, financial crises generated in developed countries quickly spread affecting the poorest and most distant nations, which saw weaker demand and lower prices for their exports, higher volatility in capital flows and commodity prices, and lower remittances.
5. Threats to the Global Commons: A major long-term threat to globalisation is the impact that rapid growth and development is having on the environment. Threats of irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and the fears of a permanent shortage of water are afflicting millions of the most vulnerable people are vital issues.
6. Trade Imbalances: Trade has grown but so too have trade imbalances. Some countries are running enormous trade surpluses and these imbalances are creating tensions and pressures to introduce protectionist policies.
7. Unemployment: Concern has been expressed by some that investment and jobs in advanced economies will drain away to developing countries. Inevitably some jobs are lost as firms switch their production to countries with lower unit labour costs. This can lead to higher levels of structural unemployment and put huge pressure on government budgets causing rising fiscal deficits.
8. Standardization: Some critics of globalisation point to a loss of economic and cultural diversity as giant firms and global brands come to dominate domestic markets in many countries.

Sovereign Wealth Funds (SWF)

Investment funds run by foreign governments, also called ‘sovereign wealth funds’ have been in existence since the 1950’s. As a result of high commodity prices and the success of export-oriented economies, China, Singapore, Dubai, Norway, Libya, Qatar and Abu Dhabi have all built up a sizeable surplus of domestic savings over investment.

Now some other countries with large reserves of oil and gas are considering setting up their own funds – in August 2012, Tanzania announced it is to set up a sovereign wealth fund. Not all have been successful. Nigeria’s has operated an Excess Crude Account the surpluses from which have been largely used to pay off existing international debts.

China established its official sovereign wealth fund China Investment Corp (CIC) five years ago with the aim of earning high returns by investing abroad the dollars China earns from its exports. In January 2012, CIC’s $410bn sovereign wealth fund, bought an 8.68 per cent stake in Thames Water, the water network that serves London. It also has investment stakes in France’s GDF Suez, Canada’s Sunshine Oil sands and Trinidad and Tobago’s Atlantic Liquid Natural Gas Company.

Sovereign wealth funds are already having an important effect on the UK economy. Singapore's Temasek owns stakes in Barclays and Standard Chartered, while Qatar and Dubai between them own about a third of the London Stock Exchange. The government of Singapore has also built up a 3 per cent stake in British Land. Dubai's sovereign wealth fund, Dubai International Capital (DIC) has invested money in building stakes in UK companies, including Travelodge and the London Eye.

Many sovereign wealth funds have provided an injection of fresh capital for the UK banking system in the wake of the losses sustained from the sub-prime crisis and the credit crunch. The banks have needed to re-capitalize to repair their balance sheets, improve their chances of survival and provide a stronger platform for a recovery in lending to businesses and individuals who need loans.

Geographical Seepage in the World Economy

Geographical seepage occurs because of inter-relationships between economies, supply-chains and financial markets

One example is how developing countries that were really not part of the financial bubble and subsequent crisis of 2007-08 have suffered economically because of the global downturn.

Seepage is partly due to the changing structure of the world economy arising from outsourcing. The share of industrial production in GDP in BRIC nations has been rising - indeed more and more industrial production takes place in emerging markets. So when demand for new cars, iPods and other electronic goods dries up from the richer nations the BRIC nations see a dramatic fall in export growth. And developing nations reliant on exporting commodities to advanced economies will suffer from a fall in demand for and price of their output.

The global credit crisis led to a partial drying up of capital flows into developing countries - one consequence is that some emerging markets find it really hard to get hold of the bank loans needed to finance their continued expansion.

Protectionism & Barriers to Trade

Protectionism - Import Controls

Trade disputes between countries happen because one or more parties either believes that trade is being conducted unfairly, on an uneven playing field, or because they believe that there is one or more economic or strategic justifications for import controls.

Protectionism represents any attempt to impose restrictions on trade in goods and services. The aim is to cushion domestic businesses and industries from overseas competition and prevent the outcome resulting from the inter-play of free market forces of supply and demand. Protectionism can come in many forms including the following:

1. Tariffs - a tax that raises the price of imported products and causes a contraction in domestic demand and an expansion in domestic supply – for example, the average import tariff on goods entering the Russian economy is 10%, although there will be higher rates for a number of products
2. Quotas – quantitative (volume) limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given time period (usually one year).
3. Voluntary Export Restraint Arrangements – where two countries make an agreement to limit the volume of their exports to one another over an agreed period of time.
4. Intellectual property laws (patents and copyrights)
5. Technical barriers to trade including product labeling rules and stringent sanitary rules, food safety and environmental standards. These increase product compliance costs and impose monitoring costs on export agencies in many countries. Huge scale vertically integrated transnational businesses can cope with these non-tariff barriers but many of the least developed countries do not have the some technical sophistication to overcome these barriers.
6. Preferential state procurement policies – where a government favour local/domestic producers when finalizing contracts for state spending e.g. infrastructure projects
7. Export subsidies - a payment to encourage domestic production by lowering their costs. Soft loans can be used to fund the ‘dumping’ of products in overseas markets. Well known subsidies include Common Agricultural Policy in the EU, or cotton subsidies for US farmers and farm subsidies introduced by countries such as Russia. In 2012, the USA government imposed tariffs of up to 4.7 per cent on Chinese manufacturers of solar panel cells, judging that they benefited from unfair export subsidies after a review that split the US solar industry.
8. Domestic subsidies – government financial help (state aid) for domestic businesses facing financial problems e.g. subsidies for car manufacturers or loss-making airlines.
9. Import licensing - governments grants importers the license to import goods.
10. Exchange controls - limiting the foreign exchange that can move between countries.
11. Financial protectionism – for example when a national government instructs its banks to give priority when making loans to domestic businesses.
12. Murky or hidden protectionism - e.g. state measures that indirectly discriminate against foreign workers, investors and traders. A government subsidy that is paid only when consumers buy locally produced goods and services would count as an example. Deliberate intervention in currency markets might also come under this category.

Quotas, embargoes, export subsidies and exchange controls are examples of non-tariff barriers

Tariffs

China joined the WTO in 1991 and since then average import tariffs have been falling on a consistent basis. Our analysis diagram below shows the standard effects of an import tariff on an imported product. The world price before the tariff is Pw and at this price, domestic demand is Qd and domestic supply is Qs.

Because of the tariff, the import price rises to Pw + T. This causes a contraction in demand to Qd2 and an expansion of supply to Qs2. The result is that the volume of imports falls to quantity M. Tariffs have welfare consequences, one of which is that the welfare of consumers who must now purchase the imported product at a higher price has fallen – there is a deadweight loss of consumer surplus. The effects of a tariff on quantities depend on the price elasticity of demand and price elasticity of supply of domestic businesses that have been given a cushion of increased competitiveness by the tariff.

Arguments for Protectionism

1. Fledging industry argument: Certain industries possess a possible comparative advantage but have not yet exploited economies of scale. Short-term protection allows the ‘infant industry’ to develop its comparative advantage at which point the protection could be relaxed, leaving the industry to trade freely on the international market.
2. Externalities and market failure: Protectionism can also be used to internalize the social costs of de-merit goods.  Or to correct for environmental market failure in the supply of certain imports.
3. Protection of jobs and improvement in the balance of payments
4. Protection of strategic industries: The government may also wish to protect employment in strategic industries, although value judgments are involved in determining what constitutes a strategic sector. This might involve attempting to reduce long-term dependence on certain imports
5. Anti-dumping duties: Dumping is a type of predatory pricing behaviour and a form of price discrimination. Goods are dumped when they are sold for export at less than their normal value. The normal value is usually defined as the price for the like goods in the exporter’s home market. Recent examples of disputes about alleged dumping have included
1. India complaining about the dumping of bus and truck tires from China and Thailand
2. EU shoemakers alleging that Chinese and Vietnamese shoe manufacturers have illegally dumped leather, sports and safety shoes in the EU market
3. In 2009 EU imposed temporary "anti-dumping" taxes on Chinese wire, candles, iron and steel pipes, and aluminum foil from Armenia, Brazil and China.

In the short term, consumers benefit from the lower prices of the foreign goods, but in the longer-term, persistent undercutting of domestic prices might force the domestic industry out of business and allow the foreign firm to establish itself as a monopoly.  Once this is achieved the foreign owned monopoly is free to increase its prices and exploit the consumer.  Therefore protection, via tariffs on 'dumped' goods can be justified to prevent the long-term exploitation of the consumer.

The World Trade Organisation allows a government to act against dumping where there is genuine‘material’ injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and show that the dumping is causing injury. Usually an ‘anti-dumping action’ means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value”.

Tariffs are not a major source of tax revenue for the Government that imposes them. In the UK for example, tariffs are estimated to be worth only £2 billion to the Treasury, equivalent to only around 0.5% of the total tax take. Developing countries tend to be more reliant on tariffs for revenue.

Arguments against Protectionism

Market distortion: Protection can be an ineffective and costly means of sustaining jobs. 

1. Higher prices for consumers: Tariffs push up the prices faced by consumers and insulate inefficient sectors from competition.  They penalize foreign producers and encourage the inefficient allocation of resources both domestically and globally.
2. Reduction in market access for producers: Export subsidies depress world prices and damage output, profits, investment and jobs in many developing countries that rely on exporting primary and manufactured goods for their growth.

Loss of economic welfare: Tariffs create a deadweight loss of consumer and producer surplus. Welfare is reduced through higher prices and restricted consumer choice.

Regressive effect on the distribution of income: Higher prices that result from tariffs hit those on lower incomes hardest, because the tariffs (e.g. on foodstuffs, tobacco, and clothing) fall on those products that lower income families spend a higher share of their income.

Production inefficiencies: Firms that are protected from competition have little incentive to reduce production costs. This can lead to X-inefficiency and higher average costs.

Trade wars: There is the danger that one country imposing import controls will lead to “retaliatory action” by another leading to a decrease in the volume of world trade. Retaliatory actions increase the costs of importing new technologies affecting LRAS.

Negative multiplier effects: If one country imposes trade restrictions on another, the resultant decrease in trade will have a negative multiplier effect affecting many more countries because exports are an injection of demand into the global circular flow of income.

Second best approach: Protectionism is a ‘second best’ approach to correcting for a country’s balance of payments problem or the fear of structural unemployment. Import controls go against the principles of free trade. In this sense, import controls can be seen as examples of government failure arising from intervention in markets.

Economic nationalism

Economic nationalism describes policies to protect domestic consumption, jobs and investment using tariffs and other barriers to the movement of labour, goods and capital

The term gained a more specific meaning in recent years after several European Union governments intervened to prevent takeovers of domestic firms by foreign companies. In some cases, the national governments also endorsed counter-bids from compatriot companies to create 'national champions'. Such cases included the proposed takeover of Arcelor (Luxembourg) by Mittal Steel (India). And the French government listing of the food and drinks business Danone (France) as a 'strategic industry' to block potential takeover bid by PepsiCo (USA