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One final reason why economists often treat the national interest argument    skeptically is that almost any product can be touted by lobbyists and politicians as vital to national security. In 1954, the United States became worried that it was importing half of the wool required for military uniforms, so it declared wool and mohair to be “strategic materials” and began to give subsidies to wool and mohair farmers. Although wool was removed from the official list of “strategic” materials in 1960, the subsidies for mohair continued for almost 40 years until they were repealed in 1993, and then were reinstated in 2002. All too often, the national interest argument has become an excuse for handing out the indirect subsidy of protectionism to certain industries or companies. After all, decisions about what constitutes a key strategic material are made by politicians, not nonpartisan analysts.

Key concepts and summary

There are a number of arguments that support restricting imports. These arguments are based around industry and competition, environmental concerns, and issues of safety and security.

The infant industry argument for protectionism is that small domestic industries need to be temporarily nurtured and protected from foreign competition for a time so that they can grow into strong competitors. In some cases, notably in East Asia, this approach has worked. Often, however, the infant industries never grow up. On the other hand, arguments against dumping (which is setting prices below the cost of production to drive competitors out of the market), often simply seem to be a convenient excuse for imposing protectionism.

Low-income countries typically have lower environmental standards than high-income countries because they are more worried about immediate basics such as food, education, and healthcare. However, except for a small number of extreme cases, shutting off trade seems unlikely to be an effective method of pursuing a cleaner environment.

Finally, there are arguments involving safety and security. Under the rules of the World Trade Organization, countries are allowed to set whatever standards for product safety they wish, but the standards must be the same for domestic products as for imported products and there must be a scientific basis for the standard. The national interest argument for protectionism holds that it is unwise to import certain key products because if the nation becomes dependent on key imported supplies, it could be vulnerable to a cutoff. However, it is often wiser to stockpile resources and to use foreign supplies when available, rather than preemptively restricting foreign supplies so as not to become dependent on them.

Problems

You have just been put in charge of trade policy for Malawi. Coffee is a recent crop that is growing well and the Malawian export market is developing. As such, Malawi coffee is an infant industry. Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you enact? Explain.

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The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in [link] and [link] .

Pepperland
Price ($) Qd Qs
60 230 180
70 200 200
80 170 220
90 150 240
100 140 250
Land of submarines
Price ($) Qd Qs
60 430 310
70 420 330
80 410 360
90 400 400
100 390 440
  1. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?
  2. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?
  3. Sketch two supply and demand diagrams, one for each country, in the situation before trade.
  4. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.
  5. If the Land of Submarines imposes an anti-dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.
  6. Does your general answer change if the Land of Submarines imposes an import quota of 70?
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References

Kohut, Andrew, Richard Wike, and Juliana Horowitz. “The Pew Global Attitudes Project.” Pew Research Center . Last modified October 4, 2007. http://www.pewglobal.org/files/pdf/258.pdf.

Lutz, Hannah. 2015. “U.S. Auto Exports Hit Record in 2014.” Automotive News. Accessed April 1, 2015. http://www.autonews.com/article/20150206/OEM01/150209875/u.s.-auto-exports-hit-record-in-2014.

Questions & Answers

What is a monopsony?
Allan Reply
economic is tha process of banking
hashmat Reply
Pls can u explain it into details
Praise
Cause I don't understand what you are saying
Praise
brownies price is 5$ quantity demand is 5000$ supplied is 3000 if brownies are not taxed how many are consumed?
Fel Reply
what is unemployment
Rita Reply
ok so what would u say is supply in your own terms
Odessa Reply
Ok
fedaa
ya
Lal
why the demand curve is downwards sloping and supply upward sloping
Odessa Reply
the dd curve is downward sloping because consumers dd less when price is high and vice versa the ss curve is upward sloping suppliers are willing to produce more when prices are high
Clifford
what is dead weight loss
jeremy
when the prices of supplies slop upward then the prices of demand curve will increases downward
Kerubino
Why scarsity is considered to be very important in the study of economics
Sesay Reply
How can you solve the problem of scarcity
Sesay
If there is a enough quantitative the problem of scarcity would be solved.
Kerubino
what is demand
aliyu Reply
Demand refers to the quantities of a commodity which consumers are willing and are able to buy at given prices.
Okonji
demand is the number units of goods or services that buyers are willing and able to buy at verous prices
muhiyadiin
what is a full form of GDPCP?
Sadhna Reply
if the price of a commodity is at 6$, is the magnitude of the excess supply
Emma Reply
The quantity supplied at a price above or higher than $6 would be the excess supply
Elisha
2003, and $12,700 in Korea. Assume the growth rates for each country remain the same. 1. Compute the doubling time for
busywork
6$ the quantity remained the same
Sekou
write shirt note of the following terms normal goods
Adamu Reply
what is normal goods
Adamu
what is a full form of GDPCP?
Sadhna
evaluate measures to remove the deflationary gap?
Tinotenda Reply
State four importance of economics
School Reply
1) Economics help us to know how gouvernement,society, individuals and house holds allocate scarce resources 2)Economics help give us valable knowldge on daily decisions 3)Economics also help us to better understand economy 4)Economics help us better our daily life
Blessing
thank you dr
BLESSED
what is scarcity?
MCclean Reply
what is economics
MCclean
why is economics not consider as pure science?
Stanly
Economics is defined as science that studies human behaviour as a relation between ends and scarce means
School
Economics is not considered as pure science because it only deals with currency and human behaviour...
School
Scarcity refers to a limited supply of goods and services
School
What is Stock exchange?
Rock Reply
An exchange where security trading is conducted by professional stockbrokers
Bnysn
A place where scurity trading is conducted on an organised system
Blessing

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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