Explain four problems with the argument that trade protection is needed to protect American jobs.

Question

What will be an ideal response?

Answer 1

There are several problems with using trade protection to “save American jobs.” First, imports may eliminate some jobs, but they create others in those industries that import products. Second, there is a fallacy of composition. The imports of one nation are the exports of another nation. Using trade policy to protect domestic jobs in the United States will weaken the trading partners of the United States. The reason for this weakness is that the trading partners will export less and thus have less income with which to buy imports from the United States. Third, there is the possibility of retaliation from trading partners that make all nations worse off. This problem occurred in the 1930 when high tariffs were imposed by the U.S. Smoot Hawley Tariff Act of 1930. Fourth, there are long run feedback effects from an excess of exports over imports. This policy leads to less income abroad that nations have to buy our goods. Workers in those export industries in the United States are thus hurt and resources are reallocated to protected industries at a great cost to the nation.