Contents

Introduction........................................................................................................................2
Argument for protecting domestic firms.............................................................................3
Methods of protectionism..................................................................................................6
Conclusion.........................................................................................................................8
References.........................................................................................................................9

Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

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Introduction.
This paper based on analyzing the importance of government support for domestic
companies, which is an important part of the economy system of each country. We have
chosen this topic because it is useful to expand the new horizons of our knowledge in a
business field and master the analytical skills by providing credible arguments to
support our point of view after careful research work.
Nowadays due to globalization and high competitiveness in economy system some
rising companies suffer from shortage of government support and as a result they lose
their strength to compete with foreign manufacturers and feel high pressure from
external opponents because of weakness, which leads to negative consequences, as
the wealth of any country is determined by the level of development of its industrial
sector. In addition these companies create new workplaces, thereby reducing the level
of unemployment rate in the internal market. At the same time there are several cons of
protectionism, which will be discussed in the following paragraphs in details.

Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

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Argument for protecting domestic firms

There are a lot of arguments that can be presented for protecting national
industries. Some of them act on protection of particular domestic firms, at the
same time some stick to opinions that the whole domestic producers should be
protected. The force of the arguments are different.
1. Protection of new created industries:
The point of view is that new industries, which have the growth potential, can be
eliminated by foreign competition before they really begin the activity. Providing with
some protection may give them the opportunity to grow, to use the advantage of
economies of scale and become internationally competitive.
However, it can be difficult to determine the infant manufacturers which really have such
a potential. There is also the risk that the industries will not properly use the opportunity
by becoming more effective, instead may become dependent on support and protection
from the government.
2. Protection of domestic companies:
This sector is also known as sunset industries. In a country with a dynamic economy,
some industries are likely to be decreasing. If other industries are enlarging and labor is
forward moving, this may not cause a problem. However, if labor is passive, the decline
of a big industry may lead to a considerable rise of unemployment rate.
The governments decision to protect the local industry, may allow it to decline gradually,
in order to avoid negative consequences on internal economy. As workers retire and
leave on their own consent, the protection can be excluded. Although, the owners of
industry can resist the abolition of protection
3. Protection of essential industries:
These are industries important for the survival of the country. Mainly government gives
greater emphasis to protection to their defense related and agricultural industries, to
guarantee consistency of supplies. Some countries, that are dependent on imports of
food and weapons, can get in a risky situation being cut off its supplies, because of
natural disasters and wars.
4. Raising employment and improving the trade position:

Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

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Reducing imports can give the opportunity to domestic firms to enlarge its productivity
and open new free vacancies. This would increase employment and income. However,
there is a high risk of retaliation.
If other countries reply by applying trade restrictions, the country will fewer buy imported
goods and also sell fewer exports. So this has a negative effect on the development of
employment, income and the trade position. Restriction the import of raw materials may
be particularly deleterious as it leads to increase in domestic firms costs of production.
5. Protection of industries from low wage competition:
This is not a significant argument in favor of protectionism. Law wages do not always
mean low costs of manufacturing. A foreign industry may pay low salary but if the
productivity of its employees is low, its average cost of production may be high.
In the case of both costs and wages are low, this may mean that the foreign industry
sector has a comparative advantage. Under such circumstances, then in terms of free
trade, demand for the industrys merchandises may increase and such higher demand
will probably maximize wages.
6. Protection of industries from unfair foreign competition:
It is generally accepted that trade restrictions can be used to prevent dumping. It
happens when foreign companies sell products at a price, less than costs of production.
This makes it very complicated for domestic firms to compete.
The foreign companies may be enjoying subsidies by their governments. A common
incentive behind dumping is to encourage domestic firms to go out of the market,
acquire a large market share and then boost prices. Firms that do not use this method
may face the problems with competing, even though their costs might be competitive by
reason of high labor productivity.
The strongest arguments for protecting domestic industries are probably the infant
industry, strategic industry and protection from unfair competition.
7. Financial revenue
Creating the most favorable conditions for the development of entrepreneurship will
enable the flow of financial resources in the bank the country's tax revenues. This will
allow the State to ensure the payment of salary to the population employed in various
service industries such as employee health care, public education, security staff as well
as pensioners and people with disabilities.
Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

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8. Receipt of foreign exchange capital

Another argument to support business is the production of high quality products able to
compete in the global market which will in the future inflow of foreign exchange capital
of the country that will strengthen the status of the state on the international level. For
example, South Korea has reached a world-class development expense of protection,
support and development of entrepreneurship and various high-quality goods.

9. Release of the goods of industrial production

Protection of State enterprise will also increase the production of goods of industrial
production, which will ensure the release of consumer goods such as cars, textiles,
chemical products, electronic appliances, and others that will minimize the parts that the
purchase of products from other countries. For example, a factory for cars in Asaka,
Andijan region, which previously assembled from different countries, and with the
development of business flow of components from abroad minimized, and most of the
components currently produced in Uzbekistan, such as storage batteries, plastic and
other rubber products.
Proceeding from the above, we can conclude that the state protection of
entrepreneurship is an important condition for its development and improvement of
living standards, as well as the welfare and security of the country.
10. Support entrepreneurs and create favorable conditions.
What is more, the state should give the entrepreneur in unhindered access to foreign
markets and to create conditions favorable for the conclusion of contracts and their
timely implementation. One of the elements of entrepreneurship development
is creation of financial and banking structure, which isolates the business with high
efficiency and speed of financial transactions. As business development depends on
ensuring broad spectrum of modern information technology services. In general, all this
will allow the government to lead competent economic trade relationship, which
ultimately provide the inflow of financial resources for further development and
improvement of all business activities implementing new technology and thus generally
offer trend continued development and improvement of all business activities
implementing new technology and thus generally give trend continued development and
growth of the state economy which depends on the well-being of its population. As it is
mentioned above that the government should support the economic basis so exporting
comes as the important activity for this development.
Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

B1401051
B1400445
B1400648
B1400696

Methods of protectionism.
Some countries are not nearly as technologically advanced as it needs to be to compete
in the global economy. Due to this problem these countries suffering from negative
balance of trade, which meant it imports more goods than exports and this also means
that countrys more money going out than coming into it. To protect internal economy,
the government pursues a policy trade protectionism, which aimed restricting imports of
foreign goods into a country. It helps to improve countrys balance of trade by reducing
imports, increase exports by developing more profitable and competitive industries and
finally to protect domestic industries from imports that will hinder their growth. There are
several tools to protect domestic firms as:
Tariff .
A special type of tax that is imposed on imports. It increases the price of imports, which
help to protect domestic industries, because imported goods become more expensive
than locally produced products.
Import quota.
It limits the quantity of specific products that can be imported into the country during a
specific period of time.
Subsidies
A direct infusions of cash by a government to a business for developing industries.
Additionally the government can give a tax breaks to developing industries to help
produce costs and increase positive cash flow. Of course many foreign competitors do
not receive each subsidy or tax break from their government , which means that
domestic businesses have a competitive advantage.
Country also has to defend against aggressive and arguably unethical trade practices of
exporting countries. One such thread is dumping, which occurs when an exporter sells
a high volume of products in a foreign country at a lower price than it charges in its own
domestic market. The suitable respond is imposing:
Anti-Dumping Duty
A tariff aimed at imports that are dumped on a market. For instance, a country may
impose 100% duty on products dumped on own market, which will make dumped
product very expensive in comparison with domestic products.
Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

B1401051
B1400445
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Positive effects of trade protectionism:

- Helps to countrys domestic economy develop new industries. These developing
industries can:

Add to the countrys economic growth

Create jobs
Increase overall wealth of the country
Lead to a better balance of trade

By contrast, protection makes some companies better off, while others worse off.
Negative effects of protection.
As we mentioned before the government uses variety of methods to protect its local
firms and it may lead to some negative consequences, for instance:

when using the additional tax, or tariff, on imported goods can discourage foreign
countries or businesses from trying to sell products in overseas. The additional
taxes make the foreign import either too expensive or not nearly as competitive
as it would be if the tariff didn't exist. This can lead to fewer choices of goods and
a lower quality for consumers.
The local firms are being protected and they are competing on price not the
quality
Not efficient from an economic standpoint
It more efficient under the concept of comparative advantage
A country must focus its production on the goods it has an advantage in
manufacturing and import those goods that it does not.
Consumers in domestic market may also have to pay a premium for a better
produced imports or not have an ability to acquire it at all. This may reduce the
standard of living of the citizens of current country.

Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

B1401051
B1400445
B1400648
B1400696

Conclusion.
We have made accurate research on given topic with supportive ideas and examples,
including pros and cons of protectionism. It is obvious that the welfare of any nation
depends on its developed economic base. Further the government has to create a state
of competent economic policy based on historical economic structure as well as taking
into account the experience of bordering and other developed countries. During the
creation the economic policy of state should cover all parts of its feature. The important
aspects of building a capable economic policy is a preparation of trained and qualified
specialists to create for them the proper training and material basis as the successful
entrepreneur. In general our work clearly proves that government responsible to
support, protect and care about local firms, since it determines the whole future
development of the economy and gives the opportunity for further access to the world
market with high quality product.

Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

B1401051
B1400445
B1400648
B1400696

References
Arguments in favor of protectionism Available at: http://dineshbakshi.com/as-alevel-economics/international-trade/177-revision-notes/2100-arguments-for-and-againsttrade-protection [Accessed on 10 November 2015]

Chand Smriti, Arguments for Protecting the Domestic Industries

Available at: http://www.yourarticlelibrary.com/industries/arguments-forprotecting-the-domestic-industries/32913 [Accessed on 9 November 2015]
Guru Supriya, Why Domestic Industries are protected?
Available at: http://www.yourarticlelibrary.com/economics/trade-economics/whydomestic-industries-are-protected-answered/38219 [Accessed on 10 November 2015]

Investopedia, How do tariffs protect domestic industries?

Available at: http://www.investopedia.com/ask/answers/042315/how-do-tariffs-protectdomestic-industries.asp [Accessed on 4 November 2015]

Metcalf Thomas, Pros & Cons of Protectionism

Available at: http://www.ehow.com/about_5106315_pros-cons-protectionism.html
[Accessed on 7 November 2015]

Pettinger Tejvan, February 2013, Examples and Types of Protectionism

Available at: http://www.economicshelp.org/blog/6911/alevel/examples-of-protectionism
[Accessed on 5 November 2015]

Shokhsanam Abdukhamidova
Nasiba Akhmedova
Zaynura-Bonu Khabibova
Yuliya Khan

B1401051
B1400445
B1400648
B1400696