4 The purpose of enacting some type of protectionist policy toward foreign goods is to limit competition from abroad, particularly when the country has domestic companies that produce and sell the same products and services. True or False True False
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A "protectionist" is someone who wants to protect domestic consumers from domestic monopolists by allowing unrestricted imports. True False
Haricharan G.
Modern protectionists have used the following arguments for protecting domestic industries against foreign competition: a. In some situations, a country can improve its standard of living by imposing protection if no one else retaliates. b. Wages in China are a tiny fraction of those in the United States. Unless we limit the imports of Chinese manufactures, we face a future in which our trade deficit continues to rise under the onslaught of competition from low-wage workers. c. $\quad$ A country might be willing to accept a small drop in its living standard to preserve certain industries that it deems necessary for national security, such as supercomputers or oil, by protecting them from foreign competition. d. For those who have studied macroeconomics: If inflexible wages and prices or an inappropriate exchange rate leads to recession and high unemployment, tariffs might increase output and lower the unemployment rate. In each case, relate the argument to one of the traditional defenses of protectionism. State the conditions under which it is valid, and decide whether you agree with it.
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Identify some qualified arguments in favor of trade protection.
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