Cambridge International AS and A Level Economics: Protectionism (9708) – Revision Notes

Quick recall for section 6.2 of the Cambridge International AS & A Level Economics 9708 syllabus (examination in 2026, 2027 and 2028). This is AS Level content, topic 6. For full explanations and the main worked model, read the study guide. Then test yourself with the practice set, the free diagnostics and the course checklist. Course home: Cambridge A Level Economics. All figures are invented.

Definitions (6.2.1 and 6.2.2)

Term	Meaning
Protectionism	Government measures that shield domestic producers from foreign competition
Free trade	Trade with no deliberate barriers (trade liberalisation)
Tariff	A tax on imports, often a percentage of price
Import quota	A cap on how much of a good may enter the country in a period, by volume or by value
Export subsidy	A payment to firms for each unit sold abroad, lowering their costs
Embargo	A ban on trade in a product or with a country
Red tape	Excessive administrative burdens: paperwork, inspections, delays
Dumping	Selling abroad below cost or below the home price
Infant industry	A new industry with high costs while it is small

Tariff versus non-tariff

Group	Tools	Works through
Tariff barrier	Tariff	The price of imports
Non-tariff barriers	Quota, embargo, red tape	Quantity, bans or cost of compliance
Export-side help	Export subsidy	Lower cost for exporters

Method in steps: a tariff on a small country

1. Find the tariff per unit: rate × world price.
2. Home price = world price + tariff.
3. Read Qd and Qs at the new price.
4. Imports = Qd − Qs.
5. Revenue = tariff per unit × imports after the tariff.
6. Consumer loss, producer gain, revenue and two triangles. The triangles are the net loss.

Worked reminder (Country D, illustrative): the world price is 50 and a tariff of 10 is applied, which is 20% of 50. Imports fall from 60 to 45 (thousand units), a fall of 25%.

• Revenue = 10 × 45 = 450 (thousand).
• Imports fell 25% for a 20% price rise: −25 ÷ 20 = −1.25, so the response of imports is elastic. The tariff cuts imports well, and revenue is limited.

Quota, subsidy and embargo reminders

• A quota that holds imports to the same level as a tariff gives the same home price. The gap between home and world price on the quota quantity is the licence value. Example: price up from 40 to 46 on 30 (thousand) units gives 6 × 30 = 180. Who gets it depends on who holds the licences.
• Export subsidy cost = subsidy per unit × units exported. A subsidy of 3 on 80 thousand units costs 240 thousand.
• An embargo takes imports to zero. The home price rises to the no-trade level, and there is no tariff revenue to soften the net loss.
• Red tape cost can be shown as a percentage of consignment value. A cost of 4% plus spoilage of 2% a day over 2 days gives 8%.
• Dumping: if a firm sells at 72 abroad against a home price of 90 and a cost of 80, it loses 8 a unit abroad. A duty of 90 − 72 = 18 lifts the price to the home price. As a percentage of 72, that is 25%.

Effects at a glance

Tool	Domestic producers	Consumers	Government	Foreign exporters
Tariff	Gain	Lose	Revenue	Lose
Quota	Gain	Lose	Only if licences sold	Lose volume
Export subsidy	Gain	Little	Pays	Rivals lose
Embargo	Gain	Lose most	None	Lose all
Red tape	Slight gain	Lose	Admin cost	Lose

Arguments (6.2.3)

For: infant industries, declining industries, anti-dumping, strategic goods, current account deficit, revenue, diversification, standards.

Against: higher prices, less choice, inefficiency, retaliation, higher input costs, cost per job, corruption, lost gains from trade.

Chain for infant industries: high cost at small scale, protected sales, output grows, economies of scale, cost falls below the world price, protection removed. It fails if protection never ends or the cost never falls.

Must-know distinctions

• Tariff or quota: tax on price against limit on quantity. Revenue is automatic for a tariff only.
• Tariff or red tape: red tape raises cost without collecting revenue.
• Embargo or quota: a ban against a cap.
• Import-side protection or export-side protection: tariffs and quotas against subsidies.
• Gross loss to consumers or net loss to the country: net loss is the two triangles.

Evaluation prompts

• Elasticity: does the tariff really change quantities?
• Time: short-run relief or long-run development?
• Retaliation: does the country export much?
• Alternatives: would a targeted subsidy cost less?
• Who gains and who pays?
• Evidence: what is the cost per job?

Chains of reasoning to learn

Tariff: tariff added, import price up, home price up, quantity demanded down, home output up, imports down. Consumers lose, producers and the government gain, and the country as a whole bears a net loss. Foreign exporters sell less.

Quota: imports capped, supply falls short of demand at the old price, price rises until demand equals the capped supply plus home output. The licence value goes to whoever holds the licences. If that is a foreign exporter, the country loses that value as well.

Export subsidy: unit cost to the firm falls, it can cut its export price, sales abroad rise, jobs rise. Taxpayers pay, rival foreign firms lose sales, and the foreign government may respond with a duty on the subsidised goods.

Embargo: trade stops, home supply falls, price rises to the no-trade level, consumers lose, home producers gain. The target loses its export market and may look for other buyers.

Red tape: paperwork and delays raise the cost of each consignment, fewer firms export, the home price rises a little, and foreign exporters lose. Small firms and perishable goods are hit hardest, and no revenue is collected.

Evaluation reminders

A statement such as “protection saves jobs” earns more when it is tested. Ask how many jobs, at what cost per job, and for how long. A tariff that saves 500 jobs by adding 108 million to input costs saves them at 216 000 each. Whether that is acceptable depends on the alternative: retraining, a targeted subsidy or doing nothing.

For infant industries, ask whether the firm can reach lower costs, and whether anyone will remove the protection when it does. For anti-dumping duties, ask whether the pricing really is below cost or below the home price, or whether the exporter is simply more efficient.

For retaliation, ask how much the home country exports to the other country and how easily those exports could be sold elsewhere.

Setting out a diagram answer in words

Label the vertical axis price and the horizontal axis quantity. Draw home demand sloping down and home supply sloping up. Mark the world price as a horizontal line, and the price after the tariff as a second horizontal line above it. Label the quantities supplied and demanded at each price, and shade the areas: consumer surplus lost, producer surplus gained, revenue, and the two triangles. Add a sentence saying what each area means, because a labelled diagram with no explanation earns less than one that is explained.

Quick self-test

1. Define protectionism.
2. A good costs 60 on the world market. A 15% tariff is applied. Find the home price.
3. Imports after a 15% tariff are 50 thousand units. Calculate revenue.
4. Name two non-tariff barriers.
5. A subsidy of 5 per unit is paid on 120 000 units. Find the cost.
6. Why might a quota help foreign exporters more than a tariff does?
7. A firm has a unit cost of 90 against a world price of 75. Find the tariff rate that closes the gap.
8. Give one reason for an embargo that is not economic.
9. Red tape costs 600 on a consignment worth 20 000. Express this as a percentage.
10. State one reason retaliation weakens the case for protection.

Answers

1. Government measures that shield domestic producers from foreign competition.
2. 15% of 60 = 9. Price = 69.
3. Tariff per unit = 9. Revenue = 9 × 50 000 = 450 000.
4. Any two of: quota, embargo, red tape, export subsidy.
5. 5 × 120 000 = 600 000.
6. If foreign exporters hold the licences they collect the higher price per unit on the capped quantity.
7. (90 − 75) ÷ 75 = 20%.
8. Political, security, health or ethical grounds.
9. 600 ÷ 20 000 = 3%.
10. Other countries may restrict the home country’s exports, so home exporters lose sales and jobs.

Where marks are usually lost

• Using imports before the tariff to find revenue.
• Writing that a quota raises revenue without saying who gets the licence value.
• Treating the consumer loss as the net loss, and forgetting the producer gain and revenue.
• Arguments for protection with no mention of how it ends.
• Calling red tape a tax, when it collects nothing.
• Describing effects only on domestic producers, with nothing on consumers or exporters abroad.
• Quoting percentages without saying what they are a percentage of.
• Evaluation that lists points but never weighs them.

Official syllabus

Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment, section 6.2.