Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 9 - Part III - Application: International Trade - Questions for Review - Page 189: 5

Answer

Five arguments for trade restrictions are destruction of jobs, that the industry in question is vital for national security, the infant-industry argument (that new industries should have less competition to get the industry started), unfair competition, and protection as a bargaining chip.

Work Step by Step

Workers in trade-affected jobs would eventually find jobs in industries where that country has a comparative advantage. The national security argument can be used too quickly by producers to gain at the expense of consumers. Newly created industries might be unprofitable at first (if other countries were allowed to compete), but in the long run, the industry should be profitable. For the unfair competition argument, usually, the surplus for consumers in one country would be greater than the loss for another country's producers. The threat of protection as a bargaining chip may not work (and lead that country to deciding between two bad options--implement the trade restriction and reduce its own economic welfare or back down from its threat and lose prestige in international affairs).
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.