Microeconomics Chapter 6

2 Reasons that Protectionism actually Costs Jobs

1) If consumers are paying higher prices to the protected industry, they inevitably have less money to spend on goods from other industries, and so jobs are lost in those other industries. 2) If another firm has to buy a key input from a protected industry at a higher price, then they have to pay more than foreign firms selling the same thing do. They'll struggle against the foreign firms who don't have to pay that higher price.

3 Rules to Successful Infant Industry Protectionism

1) Only focus on a few industries that have a realistic chance to be a world-class producer. 2) Be hesitant about using protectionism in areas like computers where it hurts other industries because they rely on the best technology available. 3) Have clear guidelines about ending it.

2 Reasons Why Dumping would Occur

1) The market prices are set by demand and supply, not by the cost of production. 2) Part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time to drive out the domestic U.S. competition, and then raise prices. AKA predatory pricing

3 Reasons why Globalization is not focusing its negative impacts on the wages of low-skilled Americans

1) it seems unlikely that half of all U.S. trade (intra-industry trade) has a heavier impact on the wages of low-skill, low-wage Americans. 2) Many low-skilled U.S. workers hold service jobs that cannot be replaces by imports from low-wage countries. 3) Low-wage workers suffer from protectionism in all the industries that they don't work in because it forces them to pay higher prices for products from protected industries.

Nontariff Barriers

All the ways a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products.

Infant Industry Argument

An argument to block imports for a short time, to give the infant industry time to mature, before eventually it starts competing on equal terms in the global economy.

Association of Southeast Asian Nations (ASEAN)

Brunei, Cambodia, Indonesia, Philippines, Thailand, Vietnam, etc.

Protectionism

Government policies to reduce or block imports.

Anti-Dumping Laws

Laws that block imports sold below the cost of production and impose tariffs that would increase the price of these imports to reflect their cost of production.

Fewer Jobs due to imports?

Nope. Not a thing. Protectionism saves jobs in the specific industry being protected but it costs jobs in other unprotected industries.

Import Quotas

Numerical limitations on the quantity of products that can be imported.

The last half-century has seen a surge of globalization.

Reductions of barriers to trade like tariffs, import quotas, nontariff barriers. Technological developments that have made international trade easier, like advances in transportation, communication, and information management.

Asia Pacific Economic Cooperation (APEC)

Regional trade agreement: Australia, USA, Canada, Chile, P.R. China, Hong Kong, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, Russia, Philippines, etc.

Asia-Pacific Trade Agreement (APTA)

Regional trade agreement: Bangladesh, China, India, Republic of Korea, Laos, Sri Lanka

North American Free Trade Agreement (NAFTA)

Regional trade agreement: Canada, Mexico, USA

European Union (EU)

Regional trade agreement: European nations, yo

Latin American Integration Association (LAIA)

Regional trade agreement: Latin American countries, yo.

Southern African Development Community (SADC)

Regional trade agreement: South African nations, yo.

Dumping

Selling internationally traded goods below their cost of production.

Tariffs

Taxes imposed on imported products

Race to the Bottom

When production locates in countries with the lowest environmental (or other) standards, putting pressure on all countries to reduce their environmental standards.

UNOS is an example of:

a 'command' solution to an economic problem.

Quotas

are a numeric (quantity) restriction on imports.

In general, when a country sets a low or medium tariff or import quota, then the equilibrium price and quantity will:

end up in between the cases of no trade at all and completely free trade.

In theory, imports injure workers in several different ways:

fewer jobs, lower wages, or poor working conditions

Trade will cause the average level of wages in an economy to

increase.

The growth of international trade has helped to ______ the productivity of U.S. workers as a whole.

raise

'Dumping' refers to

selling a product at a price below (marginal) cost.