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official list of “strategic” materials in 1960, the subsidies for mohair continued for almost 40 years until they were repealed in 1993, and then were reinstated in 2002.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

Discuss the following questions in detail. 1, Suppose a firm operating under a perfectly competitve market structure is in its equilibrium. Does mean the firm is making excess profit?if no, show the possibilities regarding the amount of profit under equilibrium position. 2, Discuss the distinction b
Sura Reply
in long run a perfectly competitive firm is making only normal profits ,
Rather
Can I be part of this discussion?
James
of course
Rather
what is microeconomics
Jnana Reply
Workout. Show the steps clearly. 1, Suppose a firm in a perfectly competitive market structure has the following total cost function, ( TC=6000+4Q-24Q the power 2 + 4Q the power 3 ) if market ptice is 40, find A, Equilibrium level of output produced by the firm in order to maximize its profit. B,
Sura Reply
Discuss the following questions in detail. 1, Suppose a firm operating under a perfectly competitve market structure is in its equilibrium. Does mean the firm is making excess profit?if no, show the possibilities regarding the amount of profit under equilibrium position. 2, Discuss the distinction b
Sura
given the dimand equation QD=24-2p find the inverse dimand equation ?
Kadir Reply
you m.i.l subject
Raj
you know m.i.l subject
Raj
shift in demand curve
Adeoye Reply
Hi Adeoye
Oluyemi
nice to meet with you
Tanbir
hello...
Ajay
why in monopolistic competition the demand curve shifts to the left
Wani Reply
Because the players are few and due to the fact that their products are differentiated, they have market influence on either price to be charged or quantity to be offered to the market
Diyaolu
given Tc=10 +6Q-0,9Q2+0,05Q3 what is Tvc ? ATc ? mc?
Kadir Reply
Tvc=6q-0.9q2+0.05q3
Diyaolu
Atc=10/q-0.9q+0.05q2
Diyaolu
Mc=6-1.8q+0.15q2
Diyaolu
why demand curve shifts to left in long run
Wani Reply
because in long run when the demand of product is more so price will be more and due to increase in price of quantity demanded will be less and demand curve will shift left gradually
Iqra
Shift in demand curve is caused by a number of factors like taste, fashion, population amongst others and depending on whether the factors are positive or negative, that would determine the shift of the demand curve whether left or right and not whether short run or long run
Diyaolu
what is focus of microeconomics
Ebisa Reply
Why we do specialize?
Wai Reply
it coz of getting more outcome by injecting less time with the help of knowledge and skills along with less amount of mistakes
Sahibzada
specialization is a method of production wheraby an entity focuses on the production of a limited scope good to gain in a degree of efficiency
Mahmood
what is market structure
Mahmood
what is market structure
Rehab
what is monopolystic
Girma Reply
type of goods and services
Nesar Reply
There are two types of goods which are capital and consumer goods
Muafue
what is microeconomics
Mahmood
micro-economics is the study of how firms and households make decisions and how they interact
Saadaq
discuss separately how scarcity arises for house holds, business and government
Hawa
who gave the concept of perfect competition in economics?
Sandeep Reply
 Léon Walras gave the first definition of perfect competition   
ADITYA
no, it was me😂
Nancy
What is Indifference curve?
Ch
Perfect competition is an idealized market structure that achieves an efficient allocation of resources.
Daauud
what are the conditions for determining the nature of goods in partial differentiation
Unique
what is economics
Arman Reply
is a science which study human behaviour as relationship between ends and scarce means hav altenative uses
Herieth
what are the other factors of demand
Aysher Reply
what are other factors in demand
Aysher

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Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
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