Protectionism

Trade Policy is determined at many different levels

- Administrative agencies within government, laws passed by the legislature, regional negotiations between a small group of nations -Global negotiations through the WTO - trade barriers have declined quite substantially in the US and global economy

Trade Conflicts and Agreements

- The global economy tries to deal with trade issues - global agreements: WTO - regional agreements: NAFTA

International Trade Effects

Contributes to a shift in jobs away from industries where that economy does not have a comparative advantage, toward industries it does have a comparative advantage, however does not have much effect on the number of jobs. Global trade should raise the average level of wages by increasing productivity, however this increase may include both gains to workers in certain jobs and industries and losses in others.

The Unsafe Consumer Products Argument

Countries are allowed to set whatever to set whatever standards for product safety they wish, but the standards must be the same for domestic products as for imported products. If there is a dispute over whether a health and safety standard is being imposing without a scientific basis.

More Arguments Against Trade

Downward pressure on wages, since US uses cheap labor unskilled workers in the US are adversely affected, Krugman is still against protectionism and believes that politicians use arguments against trade to help them attract votes

Protectionism, an indirect subsidy from consumers to producers

Protectionism will raise the price of the protected good in the domestic market, which causes domestic consumers to pay more but benefits producers

Trade-offs of Trade Policy

International trade certainly disrupts what would otherwise have been the pattern of an economy. All sorts of competitive market forces are disruptive, whether domestic or international, often causing companies and industries to rise and fall. The disruption brings with it economic benefits.

The National Interest Argument

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. Sometimes wiser to use foreign supplies when available.

Labor Standards

Its useful to draw the line between what is unpleasant to think about and what is morally objectionable. long hours in poor countries but may be the best option for them, and child labor.

Arguments Against Trade

Loss of jobs, Americans sour on trade, opinion against trade is gaining ground. Reasons to a growing opposition to trade: slow economic recovery; high unemployment; US multinational corporation intent to invest overseas instead of domestically. A growing opposition is matched by a political response. Economist argue that jobs loss in one industry is compensated by job creation in another industry. It's very costly to consumers to save jobs.

Protectionism

When a country places limitations on imports from abroad.

Anti-dumping Laws

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

The Infant Industry Argument

Small domestic industries need to be temporarily nurtured and protected from foreign competition for a time so that they can grow into strong competitors. This has worked in some countries but usually infant industries never grow up.

How do high income countries encourage stronger environmental standards in low-income countries ?

Some movement to make sure that new opportunities opened up by free trade don't injure the environment.

CONT Arguments

Some workers work under illegal and un-human conditions, low minimum wage in some countries, child labor

Trends in Barriers to Trade

The reason countries sign international trade agreements to commit themselves to free trade is to give themselves protection against their own special interests When an industry lobbies for protection from foreign producers, politicians can point out that because of the trade treaty, their hands are tied.

The Dumping Argument

The strategy is to set prices at a level below production costs, absorb losses until competitors are driven out of the market. Then, when competition has been eliminated or greatly reduced, to raise prices substantially and earn high profits. There are some historical examples where this strategy has worked, it does not appear to arise very often, it at all, in global trade. Anti-dumping complaints seem to be a convenient excuse for imposing protectionism.

US China Trade Conflict cont. 5

US China trade conflict In July 2014: US loses to China in WTO dispute Most recent is the dispute over US tariffs on Chinese products such as tires, paper, steel, flooring and wind turbines China filed the complaint with the WTO in 2012 WTO found that US punitive duties on some Chinese goods is not consistent with global trade rules China claims that the annual export value in question is about $7.2 billion

US China Trade Conflict cont.

US China trade conflict More recent is the dispute over US corn In Dec 2013 China blocked the entry of another U.S. corn cargo, after tests found a strain of unapproved genetically-modified [GMO] corn In Nov 2013 China launched a trade dispute against the United States to challenge Washington's accusations of having dumped cheap exports on the U.S. market May 2014 The U.S. accused the People's Liberation Army officers of hacking into and stealing trade secrets from the computers of several large American nuclear, metal and solar companies

US China Trade Conflict

US accuses China of fixing its currency - US accuses China of providing subsidies to its automobile export industry (Obama hits China with trade complaint) - China opens a dispute at the WTO against the US decision to impose tariff on 22 Chinese exports - US files a dispute claiming that China imposes tariffs on US Chicken

Dumping

when prices are set below the cost of production