Protection Policy

The policy of safe guarding the domestic economy from international competition is known as protection policy. In other word, protection is the restriction on the import of goods and services from abroad and encouraging domestic industries to make their product in favorable position by providing subsidies or support prices. 

Protection policy uses two types of instruments to protect domestic industries.

Tariff barrier

Under this, government imposes high custom duties on import of foreign goods. It will make foreign goods relatively expensive than that of domestic products and import declines and increases demand of domestic goods.

Non-tariff barrier

Under this policy, government control import applying the quota system exchange control, withdraw of subsidy and trade by government itself.