Firms hurt by lower priced imports typically argue that restricting trade will save U.S. jobs. What’s wrong with this argument? Are there ever any reasons to support such trade restrictions?
Trade restriction is a created restriction on the business trade of goods and services between two countries. It is as a result of protectionism. For example, several foreign jurisdictions (the European Union, Canada and Mexico) maintain “blocking laws” that address the U.S. hindrance and transactions with Cuba (Cockburn, 1994). Foreign subsidiaries may consult with in-country attorneys to determine the potential applicability of these laws.
Arguments In favor Of Trade Restrictions Include; National Defence- foreign producers cannot be major suppliers for production of defense goods, despite other countries having offering reduced prices. Anti dumping- dumping involves foreign companies selling goods that are maybe substandard and are at lower selling prices below their production costs, or even below prices charged in the market (Matthew, 2004). This protects the unfair practice will drive local producers out of business and the foreign producers will monopolize through low pricing. Infant industries- Startup companies may not effectively compete against foreigners because of the development of the company. Most countries want to nature their company’s and need protected until they achieve good economies of scale. This temporary restriction ensures the domestic industry gains comparative advantage over the foreign companies.
Trade restrictions give limitations on world trade, decrease economic efficiency, minimize total production as well as employment, increase in prices, and skew towards retaliation. Trade restrictions are beneficial to a few domestic companies and those working in the institutions at the expense of foreign international companies and domestic consumers (Matthew, 2004). While subsidies benefit a few domestic companies and staff in those exporting industries, tariffs radically reduce exports. Tariffs shift factors of production from more being effective to less effective producers.
There is a common misperception that importing goods and services to the US come at a cost of jobs. In fact, imports contribute enormously to job creation. There are increased economic activities associated with every stage of the import process helps support millions of jobs in the U.S. An analysis by Heritage Foundation shows that over five hundred thousand American jobs emerge as a result of many imports of clothes and baby toys from China alone. Mostly the jobs are in many fields for example, transportation, retail, wholesale, construction, and finance. Getting to know the positive role played by imports with respect to jobs and other benefits, is crucial to adopting the correct trade policies and thus to accelerating the economy.