21.2 The Effects of International Trade and Arguments in Favor of Restricting Imports

True or false?

It is typical for rich countries not to provide mandated paid leave for new parents.

False

According to a recent study by the Organization for Economic Cooperation and Development (OECD), the U.S. is the only one of 41 countries that do not provide mandated paid leave for new parents, and among the 40 countries that do mandate paid leave, the minimum duration is about two months. 

Anti-dumping laws block imports that are sold below the cost of production by ______________.

Select the correct answer below:

imposing tariffs that increase the price of these imports to reflect their cost of production

imposing tariffs that increase the price of these imports to make them less competitive than other companies products

completely banning imports from companies known to engage in dumping

limiting quantities that firms are allowed to import into a country

imposing tariffs that increase the price of these imports to reflect their cost of production

Dumping refers to selling goods below their cost of production. Anti-dumping laws block imports that are sold below the cost of production by imposing tariffs that increase the price of these imports to reflect their cost of production. Since dumping is not allowed under World Trade Organization (WTO) rules, nations that believe they are on the receiving end of dumped goods can file a complaint with the WTO. 

The national interest argument is about protecting certain industries that our country is dependent on, such as

Select all that apply:

the oil industry

industries that are key for our national defense

infant industries

export-oriented industries

the oil industry

industries that are key for our national defense

Some argue that a nation should not depend too heavily on other countries for supplies of certain key products, such as oil, or for special materials or technologies that might have national security applications.

Why does protectionism cost jobs in other unprotected industries?

Select the two correct answers below.

Select all that apply:

When people take jobs in the protected industry, they leave jobs in other industries.

When the product of a protected industry is an input in the production of other industries, then the higher input price from protectionism results in higher costs of production, higher prices, lost sales, thus, loss of jobs.

Consumers will switch to buying the goods of the protected industry, therefore they buy fewer goods from unprotected industries, therefore, causing them a loss of revenue and jobs as a result.

If consumers are paying higher prices to the protected industry, they have less money to spend on goods from other industries, and so jobs are lost in those other industries.

When the product of a protected industry is an input in the production of other industries, then the higher input price from protectionism results in higher costs of production, higher prices, lost sales, thus, loss of jobs.

If consumers are paying higher prices to the protected industry, they have less money to spend on goods from other industries, and so jobs are lost in those other industries.

First, if consumers are paying higher prices to the protected industry, they inevitably have less money to spend on goods from other industries, and so jobs are lost in those other industries.

Second, if a firm sells the protected product to other firms so that other firms must now pay a higher price for a key input, then those firms will lose sales to foreign producers who do not need to pay the higher price. Lost sales translate into lost jobs. The hidden opportunity cost of using protectionism to save jobs in one industry is jobs sacrificed in other industries. 

Dumping refers to the sale of a product in a foreign market

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Select the correct answer below:

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at a price that is lower than anyone else's price

at a price below its cost of production

at a price of $0

at a price that matches competitor's prices

at a price below its cost of production

Dumping refers to selling goods below their cost of production. Anti-dumping laws block imports that are sold below the cost of production by imposing tariffs that increase the price of these imports to reflect their cost of production. Since dumping is not allowed under World Trade Organization (WTO) rules, nations that believe they are on the receiving end of dumped goods can file a complaint with the WTO. 

Under the WTO rules for protectionism under the unsafe consumer products argument, countries cannot

Select all that apply:

use this argument as a valid reason for protection.

apply different safety standards to domestic and imported goods.

apply standards that have no scientific basis.

apply standards that differ from those of their trading partners.

apply different safety standards to domestic and imported goods.

apply standards that have no scientific basis.

Under WTO rules it is perfectly legitimate for the United States to pass laws requiring that all food products or cars sold in the United States meet certain safety standards approved by the United States government, whether or not other countries choose to pass similar standards. However, such standards must have some scientific basis. It is improper to impose one set of health and safety standards for domestically produced goods but a different set of standards for imports, or one set of standards for imports from Europe and a different set of standards for imports from Latin America.

Companies often choose to build plants compliant with stricter environmental standards when they locate in low-income countries with lax environmental standards. This is because

Select the correct answer below:

they want to improve the living conditions of people living in these countries

designing an industrial plant is a complex and costly task, and so if a plant works well in a high-income country, companies prefer to use the same design everywhere

they want to show local companies that the environmental issues caused by production should be taken seriously and dealt with appropriately

they want to have a better record of compliance with environmental laws than do locally-owned plants.

designing an industrial plant is a complex and costly task, and so if a plant works well in a high-income country, companies prefer to use the same design everywhere

When an international company does choose to build a plant in a low-income country with lax environmental laws, it typically builds a plant similar to those that it operates in high-income countries with stricter environmental standards. Part of the reason for this decision is that designing an industrial plant is a complex and costly task, and so if a plant works well in a high-income country, companies prefer to use the same design everywhere. Also, companies realize that if they create an environmental disaster in a low-income country, it is likely to cost them a substantial amount of money in paying for damages, lost trust, and reduced sales—by building up-to-date plants everywhere they minimize such risks. As a result of these factors, foreign-owned plants in low-income countries often have a better record of compliance with environmental laws than do locally-owned plants.