hey hey everybody I hope you're doing well today well this is the introductory and overview video for free trade and protectionism the next unit in the international economics curriculum listen this this uh unit really focuses on the arguments for and against protectionism and also then focuses on how countries would go about protecting themselves from International Trade so by the end of this unit you should be able to obviously Define free trade give examples of and evaluate Arguments for protectionism explain and give examples of and evaluate arguments against protectionism explain and illustrate free trade you should be able to Define explain illustrate and give examples of the types of protectionism right and also evaluate from diagrams the effects of imposing a tariff setting a quota or giving a subsidy on different stakeholders and then of course in the end you always got to be able to evaluate the effective different types of trade protection so this is the beginning of that Journey um don't get overwhelmed by any of that information it's all going to make sense in the end but these are the things you should be able to do by the end of this unit so first free trade what is it well here's a definition is said to take place free trade is said to take place between countries when there are no barriers to trade in place by governments or International organizations it's just like it sounds right it takes place between countries internationally when there are no barriers to trade in place by governments of both countries or International organizations so quite simply goods and services are allowed to move freely between countries okay so free trade means frictionless movement of goods the government just says hey that's cool sure we We Live in Chile we'll buy your Argentinian products no problem ah yeah okay no problem you know we we live in Mexico sure we'll accept your us products and you accept our Mexican products okay that's great right oh sure you know we live in Japan sure we'll take your Korean products and Korea you take our Japanese products right that is free trade so overall the way this unit's going to run we're going to talk about arguments in favor of protectionism we'll talk about the types of protectionism we'll talk about ways in which um administrative barriers that's a nice way of saying the way in which governments can put up these little roadblocks to make free trade not possible and then we'll talk about the arguments against protectionism which is to say we'll talk about the arguments for free trade but we kind of already have because the gains from International Trade are the arguments for free trade so if you saw the video on why do countries trade and you understand those seven reasons then you realize that these are also the arguments against protectionism right because protectionism and free trade are opposites but before we go any further take a look at uh there are some key terms that I want to make sure you have there are four the first one is protectionism right we could talk about it all we want but we need to have a nice useful definition that you could use uh in an essay so protectionism is the use of tariffs quotas subsidies or administrative barriers aimed at making domestic producers more competitive with foreign producers by limiting the quantity of imports into the nation right I've talked about this macroeconomic bubble that exists over the top of every country right and if if that bubble is really hard to to to get through because there's a tariff a quota subsidy administrative barriers then there's not going to be free trade okay and the reason the governments do that is to protect their own people governments are only interested in their own people because their own people are the people that that elect them right so governments are looking out for their own people always tariff a tariff or tariffs are taxes placed on imported goods services or resources a tariff increases the cost of the imported good right it comes in at a dollar and then the government slaps a 50 Cent tax on it and all of a sudden in order to get it in the country or if you want to buy it in that country you have to pay $150 so a tariff increases the cost of imported good reducing their supply and causing the price by domestic consumers or price of demestic consumers to rise therefore domestic quantity supplied is greater than it would be without the Tariff there's the impact of it protective subsidy a protective subsidy definition is a payment from the government to domestic producers meant to increase domestic consumption of the their goods or to promote the export of their good to the rest of the world so basically it's saying like Okay let's take corn for example if there's a government subsidy to Corn then the result will that will be that the United States let's say will produce more corn as a result of of the subsidy because that lowers the factors of production and that the cost of the factors of production and as a result that'll lower the cost of corn and therefore us consumers us sorry us producers will be more competitive on the World Market the the subsidy the impact would be increases the domestic supply of a good and therefore increases the quantity consumed by domestic consumers and lastly before we move on you got to know what a quota is a quota is a physical limit on the quantity of a good service or resource that may be imported think of a quota as a limit right a quota means that you are only going to accept so many tons of steel into your country and if it's 200,000 tons of steel of Japanese steel and then you the first two what did I say 2,000 tons of Japanese steel that comes into your country get in and then after that nothing right so a quota is a physical limit on the number of goods that can come the quantity of goods or service or resources that can come into your country so a quota will result in a shortage of imports in the short run which drives up the domestic price and leads the domestic producers to increase their quantity supplied there are videos on a protective tariff a protective subsidy and a protected quota check them out uh individually for for more clarity on that so but of course all of these lead to a misallocation of resources and lead to a loss of total welfare globally protectionism is government intervention in the international market and as a result there's going to be a messing up of the natural equilibrium of goods and service the prices of goods and services and as a result you're going to have a misallocation of resources it all comes back around and around and around to you okay cool that's the awesome thing about economics it just keeps building and building and building and your understanding gets broader and broader and broader and now you're building your understanding on an international scale of the impact of really simple uh supply and demand forces all right Coolio my friends I hope you found this video to be helpful and we'll talk to you in a bit