<< Chapter < Page Chapter >> Page >

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official list of “strategic” materials in 1960, the subsidies for mohair continued for almost 40 years until they were repealed in 1993, and then were reinstated in 2002.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.


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.

Got questions? Get instant answers now!

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] .

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?
Got questions? Get instant answers now!


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 are the indicator of over population
Accorobatic Reply
Inefficiency of natural resources
Low PCI .
what product market?
Gayflor Reply
explain demand
Bless Reply
what is economics
Economics is the social science that studies the production, distribution and consumption of goods and services.Economics focuses on the behaviour and interactions of economic agents and how economies work.
Pls what is national income?
demand is the number of buyers. as the price of goods is increase, the buyers will not consider to buy the goods, so the demand will decreases
National Income is the aggregate monetary value of all final goods and services produced in an economy in an year .
Why pecularities of land has no economic significance, What the economic bad, effictive demand?
what is deadweightloss
francis Reply
deadweight loss is the allocative inefficiency.... when the equilibrium for good or services is not achived.
hii too
how are you all?
I am here been sick but here
may you get well soon Amanda
What are the implications of classical Economics?
What are the implications of classical Economics school of thought?
Dead weight loss is an inefficient allocation of resources, especially through taxation or restrictions.
Classical Economics had an influenced by ancient economic principle and theory.
hello please what is localization of industry
Bless Reply
price is tantalisingly the only factor determining demand which can be analyze the view
Sinit Reply
Price is tantalizingly the only factor determining demand which can be analyze the view
what is scarcity
Sharkdanny Reply
the state of being scarce or in short supply; shortage.
what is meant by an abnormal demand curve?
Samuel Reply
what is microeconomics
Berun Reply
micronomics can be define as that part of Economics that deals with small scale business. e.g. House hold stuff
Micro economics is the study of individuals, households and firms' behavior un decision making and allocation of resources
what is underemployment
Xornam Reply
It is the situation where the available resources are not used to it optimum
state the law of diminishing returns
Bless, the law of diminishing returns state that one point, adding a single worker will result in a decrease of production.
it is a situation where by people are employ but work under their potential
David please go into details kk
Akua pls when you say people alone? what about facilities?
Definition of underemployment. 1 : the condition in which people in a labor force are employed at less than full-time or regular jobs or at jobs inadequate with respect to their training or economic needs
OK that is good
I am new here
what does law of demand says?
with a diagram explain fairy elastic demand
comprehensive answer for public finance is the money that a government has available to spend from taxes and borrowing.
wilflay Reply
what then comprises of public opinion
what is macro economics
Definition of demand and supply
oyebanji Reply
whatd is name of economic scholars defined classic view
Ahmed Reply
Whole Classical view is based on J.B.Say's Law of Marker demand
the science of economic has both positive and normative aspect,discuss.
Mkiwa Reply

Get the best Principles of economics course in your pocket!

Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?