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●● To protect new or weak industries. A new, or infant, industry may not be strongenough to withstand foreign competition. Temporary trade restrictions may beused to give it a chance to grow and become self-sufficient. The problem is thatonce an industry is protected from foreign competition, it may refuse to grow,and “temporary” trade restrictions will become permanent. For example, a recentreport by the Government Accountability Office (GAO), the congressional investigativeagency, has accused the federal government of routinely imposing quotason foreign textiles without “demonstrating the threat of serious damage” to U.S.industry. The GAO said that the Committee for the Implementation of TextileAgreements sometimes applies quotas even though it cannot prove the textileindustry’s claims that American companies have been hurt or jobs have beeneliminated.●● To protect national security. Restrictions in this category generally apply to technologicalproducts that must be kept out of the hands of potential enemies. Forexample, strategic and defense-related goods cannot be exported to unfriendlynations.●● To protect the health of citizens. Products may be embargoed because they aredangerous or unhealthy (e.g., farm products contaminated with insecticides).●● To retaliate for another nation’s trade restrictions. A country whose exports aretaxed by another country may respond by imposing tariffs on imports from thatcountry.
●● To protect domestic jobs. By restricting imports, a nation can protect jobs in
domestic industries. However, protecting these jobs can be expensive. For example,
protecting 9,000 jobs in the U.S. carbon-steel industry costs $6.8 billion, or
$750,000 per job. In addition, Gary Hufbauer and Ben Goodrich, economists at
the Institute for International Economics, estimate that the tariffs could temporarily
save 3,500 jobs in the steel industry, but at an annual cost to steel users of $2
billion, or $584,000 per job saved. Yet recently the United States imposed tariffs of
up to 616 percent on steel pipes imported from China, South Korea, and Mexico.
Similarly, it is estimated that we spent more than $100,000 for every job saved in
the apparel manufacturing industry—jobs that seldom paid more than $35,000
a year.
Reasons Against Trade Restrictions
Trade restrictions have immediate and long-term economic consequences—both within
the restricting nation and in world trade patterns. These include the following:
●● Higher prices for consumers. Higher prices may result from the imposition of
tariffs or the elimination of foreign competition, as described earlier. For example,
imposing quota restrictions and import protections adds $25 billion annually
to U.S. consumers’ apparel costs by directly increasing costs for imported
apparel.
●● Restriction of consumers’ choices. Again, this is a direct result of the elimination
of some foreign products from the marketplace and of the artificially high prices
that importers must charge for products that are still imported.
●● Misallocation of international resources. The protection of weak industries results
in the inefficient use of limited resources. The economies of both the restricting
nation and other nations eventually suffer because of this waste.
●● Loss of jobs. The restriction of imports by one nation must lead to cutbacks—and
the loss of jobs—in the export-oriented industries of other nations. Furthermore,
trade protection has a significant effect on the composition of employment. U.S.
trade restrictions—whether on textiles, apparel, steel, or automobiles—benefit
only a few industries while harming many others. The gains in employment accrue
to the protected industries and their primary suppliers, and the losses are spread
across all other industries. A few states gain employment, but many other states
lose employment.
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