d: Explain who derives
benefits and losses from the imposition of a tariff.
Tariffs benefit domestic producers of products because the level of imports will be reduced
due to an effective increase in the price of the good. For example, if the world price of
semiconductors is $40, and domestic producers can only profitably sell semiconductors at
$45, foreign producers have a comparative advantage. Hence, domestic producers will not be
able to compete in their own domestic semiconductor market. However, if the government
places a $5 tariff on imported semiconductors, local producers will become competitive with
foreign producers in the local market and local semiconductor production will rise. Tariffs will
also benefit the government. They will collect the $5 tax on all foreign semiconductors sold in
the domestic market.
Even though the government collects tariffs and supposedly uses these funds to increase the
welfare of its citizens, consumers in the country still lose. Because the demand curve is
downward sloping, the loss in consumer surplus cannot be fully recovered by tax revenue.
e: Discuss the validity of the arguments for trade restrictions.
Some reasons given for trade restrictions have some or partial validity:
National defense argument: Some industries are highly sensitive to national security and
should therefore remain in the country.
Infant industries argument: These industries should be protected for a time while they
develop and reduce costs. One problem with this is that it is often hard to remove these
tariffs.
Anti-dumping argument: Tariffs are used to prohibit foreign firms from selling products in the
country at below cost in an attempt to gain market share.
Other reasons for trade restrictions are of more questionable validity:
Do trade barriers protect jobs? Part of the popularity of trade restrictions stems from their
ability to protect easily identifiable jobs and the high wage levels in these jobs. But, in the long
run, however, trade restrictions cannot protect the net number of jobs in the country.
Do trade restrictions create jobs? In the short run maybe, but in the long run, No! Trade
restriction prevent your trading partners from developing the purchasing power needed to buy
import goods from you, thus depressing your own export industry.
Does trade with low-wage countries depress wage rates in high-wage countries? No!
The belief that trading with low-wage countries depresses wages is based on a
misunderstanding of the law of comparative advantage. A high hourly wage does not
necessarily mean high per unit labor costs.
找金融资料，就到一览金融文库