Arguments Against International Trade - Online Tutor, Practice Problems & Exam Prep

Protectionism argues against international trade by emphasizing job security, national security, and the need to protect infant industries. While jobs may shift due to comparative advantage, new opportunities arise in competitive sectors. National security concerns about trading key resources can be ambiguous. Additionally, government intervention in selecting industries can lead to inefficiencies. Despite these arguments, international trade enhances consumer choice, lowers costs through economies of scale, increases competition, and facilitates the flow of ideas, ultimately benefiting the economy.

Arguments Against International Trade

Now let's consider what some of the arguments against international trade might be. So we're going to have this idea of protectionism. Protectionism is where we're protecting our domestic industries. Right. We're protecting it from foreign competition. Right. So protectionism is where these arguments come from. So the first one is the idea of jobs, the jobs argument. They're going to take our jobs. If we open up to international trade, they're going to be able to supply at a lower price and take our jobs. Right? So the idea here is that we got to go back to the idea of comparative advantage, right. When we think about comparative advantage, when we think of international trade, yeah, that other country might be better at producing this than us. So let's say maybe it's something like textiles, right? Other countries are usually better than the US and have a comparative advantage so yeah maybe in the short run we're going to lose some jobs in textiles, but what's going to happen is that the industries where we do have the comparative advantage are going to have new jobs, right? We're going to kind of see a shifting of jobs to a new industry, so it's more like the jobs are going to move to an industry in the long run. Jobs move to new industry, right, and this new industry is where we're going to have a competitive advantage, so we'll see those jobs kind of move over there right? It's not like they can be better than us at everything right? How we've seen with comparative advantage, one country is always going to have a comparative advantage in something, right? You just can't have no comparative advantages at all. Cool.

So the next argument here is the national security argument, right? We're going to trade away key resources that our enemies can use, right? Like if we trade away, I don't know, like uranium or something that they can make bombs or whatever, right? They say that this is going to be a national security issue. So the issue with this argument here is kind of where are we going to draw the line of what is a risk to our national security right? So where do we draw the line? Right. So you can see that maybe, you know, trading uranium might be a bad idea, right? Something that they can make nuclear weapons with, but like how about something like steel, right, where there's kind of this gray area, right? Like steel, yes it can be produced, it can be used to produce weapons, but it's used for many different things, right? Construction, everything we use steel. So is it like now we can't trade steel because you know it's going to they can possibly use it for weapons or where do we draw the line even? How about trading cows, right? We can't trade cows to this country, they're going to feed their military and then they're going to be able to attack us because they have food, right? So where do we really draw the line of what is a security risk and what isn't, right? So, in that case, that's kind of the argument there.

So the next one here is the infant industry argument. So the idea here is where we have you know a company, it's a new company and they can't compete with foreign competition. My new company can't compete with foreign competition. Please, don't allow this international trade. So what ends up happening here is now what you're asking the government to do is basically speculate on which industry is going to be good or bad, right? You're asking the government to pick winners and losers as far as like oh this company is going to make it or this industry is going to make it so we need to protect it, right? And that's not the role of the government. The government shouldn't be speculating. So government speculation really it's just not the role of government to be kind of picking oh we should protect this industry and not that industry, right? So that's that one.

Let's go on to the next one here, unfair competition, right? So a different country is going to play by different rules, right? What if you see in another country maybe they're subsidizing a particular industry, right? So how are you supposed to you know, compete with this other country where they're going to have this comparative advantage, this clear advantage because the government is helping them in this industry. Well, what a lot of times what people forget is that you're only looking at one side there, right? The idea is when the government's subsidizing the industry, that's good for our consumers, right, because they're going to be supplying it at a lower price. So we're going to see just like we saw when we were importing, right, that the benefits to the consumers outweigh the losses to the producers. Right? So in that case, it's really not a great argument either because we see that this international trade increases the total surplus when we allow it to happen, right?

And last but not least, we've got this idea of protection as a bargaining chip, right? So this is more like a political kind of leverage where one country can be like you better take that tariff off of that good or we're going to add a tariff to our good, right? So it becomes this kind of using the tariff or using some sort of restriction on trade as a bargaining chip, right? But what ends up happening is that it doesn't always work right? You might put out this demand but they're not going to call it maybe they call your bluff right? And you end up looking like a fool, right? So it doesn't always work and you could just look like a fool, right? You might look like a fool in the international community here, right? So you might lose some political clout there. Right, so there you go, you can see there's these arguments against international trade and of course, economics is going to have some sort of rebuttal here. So if you haven't noticed so far in this course, this course has basically been you know a huge capitalist propaganda, right? Everything's good, everything's good about how we deal with our economy, right? So it kind of takes us back to that idea of the positive and the normative statements, right? What you know, you're going to get a bias when you when you take a course like this, but basically what we've seen is that international trade is generally pretty good, right? Other benefits that we see from international trade, things like a variety of goods, right? Just like we saw those strawberries in the United Kingdom, they're if we didn't have trade we wouldn't have those delicious strawberries everywhere right? So these increased variety of goods, you just get different stuff when you're trading in an international community. Lower cost through economies of scale. Alright, so economies of scale, we're going to dive into this topic a lot more, but the idea here is that you're able to lower costs by increasing production. Increasing production. Right? So we're not going to dive too much into that but the idea here is since we're trading in an international community, we're able to basically get you know if you think about buying you know a packet of cheese to make a pizza or if you were to buy like an entire farm's worth of cheese right, you could probably get a discount when you buy more cheese right. So these kinds of economies of scale when we're dealing with these bigger consumer bases. So we're going to see increased competition in a global market which again is good right, it forces everyone to be more efficient, it forces everyone to bring prices down and do everything as efficiently as possible right, so that competition helps with efficiency. And last just an enhanced flow of ideas, right? When we're trading internationally we're going to see a flow of ideas, we're going to see technology, reaching new hands and just new ways to use information. Cool, so these are other benefits that we see. We saw the arguments against international trade above, so welcome to America. Let's go ahead and move on to the next video.

Here’s what students ask on this topic:

What are the main arguments against international trade?

The main arguments against international trade include job security, national security, protection of infant industries, unfair competition, and the use of protectionism as a bargaining chip. Job security concerns arise from the fear that foreign competition will lead to job losses in domestic industries. National security arguments focus on the risks of trading key resources that could be used against the country. The infant industry argument suggests that new industries need protection from established foreign competitors. Unfair competition concerns arise when foreign governments subsidize their industries, making it hard for domestic companies to compete. Lastly, protectionism can be used as a bargaining chip in international negotiations, but this strategy can backfire.

How does protectionism aim to protect domestic jobs?

Protectionism aims to protect domestic jobs by imposing tariffs, quotas, and other trade barriers to limit foreign competition. The idea is that by making imported goods more expensive or limiting their availability, domestic industries will be able to maintain or increase their market share, thereby preserving jobs. However, while this may protect jobs in the short term, it can lead to inefficiencies and higher prices for consumers. Over time, jobs may shift to industries where the country has a comparative advantage, leading to new employment opportunities in more competitive sectors.

What is the national security argument against international trade?

The national security argument against international trade posits that trading certain key resources or technologies could pose a risk to a country's security. For example, exporting materials like uranium, which can be used to make nuclear weapons, could be dangerous if they fall into the wrong hands. However, the challenge lies in determining where to draw the line. While some resources clearly pose a risk, others, like steel or agricultural products, are more ambiguous. This makes it difficult to create clear policies without potentially harming beneficial trade relationships.

Why is the infant industry argument used to justify protectionism?

The infant industry argument is used to justify protectionism by claiming that new or emerging industries need time to develop and become competitive. Without protection from established foreign competitors, these young industries may struggle to survive. Proponents argue that temporary trade barriers, such as tariffs or subsidies, can help these industries grow until they are strong enough to compete on their own. However, critics argue that this approach requires the government to pick winners and losers, which can lead to inefficiencies and market distortions.

How does unfair competition affect domestic industries?

Unfair competition affects domestic industries when foreign competitors receive subsidies or other forms of government support, giving them an advantage in the market. This can make it difficult for domestic companies to compete, as the foreign products may be sold at lower prices. While this can benefit consumers through lower prices, it can harm domestic producers and lead to job losses. However, the overall effect on the economy can be positive, as the benefits to consumers often outweigh the losses to producers, leading to increased total surplus.

What are the potential downsides of using protectionism as a bargaining chip?

Using protectionism as a bargaining chip involves threatening to impose trade barriers, such as tariffs, to gain leverage in international negotiations. The potential downsides include the risk that the other country may call the bluff, leading to a trade war that can harm both economies. Additionally, this strategy can damage a country's reputation and political clout in the international community. It may also lead to inefficiencies and higher prices for consumers, as well as strained diplomatic relations.