Question

For each scenario, identify which argument is being used to justify trade protectionism.

Argument:
1. Job creation argument
2. National Security argument
3. Infant industry argument

a. Politicians in a small nation want to impose tariffs on foreign food because they believe the nation is too dependent on foreign producers.
b. Lobbyists argue that by prohibiting the importation of manufactured goods, the domestic manufacturing industry will create thousands more jobs.
c. Brazil imposes high tariffs for computer imports so small, domestic manufacturers can develop the technology needed to compete with foreign competitors.
d. Lobbyists argue that raising import tariffs on foreign oil will lead to more domestic jobs in the domestic energy industry.

Answer 1

a. Politicians in a small nation want to impose tariffs on foreign food because they believe the nation is too dependent on foreign producers.

• 2. National Security argument

This argument is generally used on high tech products, but it is sometimes used to support other industries that are considered essential and very important for a country. The problem is that it always results in higher domestic prices benefiting only a few.

b. Lobbyists argue that by prohibiting the importation of manufactured goods, the domestic manufacturing industry will create thousands more jobs.

• 1. Job creation argument

Under this policy, politicians think that they can substitute imports by local products which would favor the trade balance and also generate jobs. The problem is that domestic prices might be very high and consumers will be forced to pay those high prices. Also, other economies can retaliate and the country's exports might be negatively affected.

c. Brazil imposes high tariffs for computer imports so small, domestic manufacturers can develop the technology needed to compete with foreign competitors.

• 3. Infant industry argument

This argument is used by politicians that claim that infant industries (or recent, new industries) need to be protected in order to be able to function, prosper and grow. The problem with this argument is that industries operate under a bubble and consumers are charged very high prices for obsolete technology.

d. Lobbyists argue that raising import tariffs on foreign oil will lead to more domestic jobs in the domestic energy industry.

• 1. Job creation argument

Again, under this policy, politicians think that they can substitute imports by local products which would favor the trade balance and also generate jobs. The problem is that domestic prices might be very high and consumers will be forced to pay those high prices.