what is the difference between mercantilism and protectionism?
Answers
Economic protectionists seek to isolate their domestic markets from foreign competition, so that their local producers cannot be out-competed and replaced by imported products.
This is usually done by imposing high tariffs (taxes) on competing imports.
An example of a protectionist measure would be if Switzerland taxed foreign watches: this would make imported watches more expensive than Swiss watches (which aren’t taxed), and thereby make Swiss customers more likely to buy Swiss watches.
Importantly, economic protectionism focuses on protecting, or defending domestic markets: it does not necessarily seek to expand them. This is why protectionism is passive: it seems economic isolation.
Mercantilism takes this idea one step further: mercantilists are active, they seek to grow the domestic economy by actively investing in it, and by expanding international markets for their products—while still limiting foreign competition.
For example, a mercantilist may raise tariffs on foreign goods (like the protectionist), but they would also want to invest in a new port to help get products to markets, and they would seek preferential trade deals abroad (acquire markets for their exports).
The goal of mercantilism is to maximize the amount of advanced industries in the country, and to promote economic self-sufficiency. Generally, these policies result in the nation exporting advanced products (manufactured goods), and importing raw materials. That’s the key.
Basically, protectionists are happy with their economic pie, they just don’t want to share; mercantilists not only want their pie, but they want some of yours too. This is why mercantilism is active.