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Chapter 20: Q. 31 (page 490)

What is the national interest argument for protectionism with regard to certain products?

Short Answer

Expert verified

Products of national interest must have lesser reliance on imports.

Step by step solution

01

Step1. Introduction

With the increased globalization, protectionist policies are necessary. Protectionism essentially means the reduction in the volume of foreign trade and putting a cap and check on it.

02

Step2. Explanation

National interest arguments with respect to certain products states that for products like defense equipment, oil, technology, a country must not be too dependent on other countries. It is so because the trading country can comprise in terms of quality, pricing, etc and then the dependent country shall suffer.

It is hence important to let the domestic industry develop through protectionist policies. This is the argument put forward under national interest argument for protectionism.

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Most popular questions from this chapter

Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.

Economists sometimes say that protectionism is the “second-best” choice for dealing with any particular problem. What they mean is that there is often a policy choice that is more direct or effective for dealing with the problem—a choice that would still allow the benefits of trade to occur. Explain why protectionism is a “second-best” choice for:

a. helping workers as a group

b. helping industries stay strong

c. protecting the environment

d. advancing national defense

Assume two countries, Thailand (T) and Japan (J),

have one good: cameras. The demand (d) and supply (s) for cameras in Thailand and Japan is described by the following functions: QdT

= 60 – P

QsT = –5 + 14 P

QdJ = 80 – P

QsJ = –10 + 12P

P is the price measured in a common currency used in both countries, such as the Thai Baht.

a. Compute the equilibrium price (P) and quantities

(Q) in each country without trade.

b. Now assume that free trade occurs. The free-

trade price goes to 56.36 Baht. Who exports and

imports cameras and in what quantities?

Show graphically that for any tariff, there is an equivalent quota that would give the same result. What would be the difference, then, between the two types of trade barriers?

What are some examples of innovative products that have disrupted their industries for the better?
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