What can be considered a form of protectionism?

Protectionism refers to economic policies that countries implement to shield their domestic industries from foreign competition. This often includes measures that can distort free-market principles to favor local businesses over international ones.

Providing hidden subsidies to domestic companies is a form of protectionism because it gives these companies an unfair advantage in the market. By subsidizing certain industries or businesses, a government can lower their operational costs, allowing them to offer products at lower prices than foreign competitors. This can lead to a distortion of competition, making it harder for foreign goods to enter the domestic market despite potentially being of equal or better quality. Such policies are designed to protect local jobs and industries but can lead to retaliatory actions from other countries and can ultimately harm the global trading system.

In contrast, reducing tariffs on exports promotes trade rather than restricts it, encouraging a more open market environment. Encouraging free trade policies, by nature, advocates for less protectionism and aims to facilitate a global exchange of goods and services. Increasing foreign investments typically represents an openness to foreign business and capital, which is contrary to protectionist ideologies. Thus, hidden subsidies stand out as a clear method of maintaining a protective barrier around domestic industries.