• 3 of the most common:

  1. It’s wrong to trade with countries that use child labor

  2. We need to keep certain industries at home for reasons of national security

  3. We can increase US well-being with strategic trade protectionism

Child Labor

• Labor activists discovered that Walmart was selling clothing made in Bangladesh which uses some child labor

• A senator tried passing a bill to prohibit firms from importing any products made by children under 15

  • It didn’t pass

  • Garment industry in Bangladesh panicked and dismissed 30-50,000 child workers

    • These children were not better off because they had to work elsewhere, like prostitution with worse conditions and lower pay

• Many children around the country work many hours of the week

  • Most of them work in agriculture, a lot of the times next to their parents, and not in the export industries

    • Restrictions in trade can’t directly reduce the number of child workers, and by making a poor country poorer, trade restrictions may increase the number of child workers

    • Studies have shown that more openness to trade increases income and reduces child labor

• Bans on child labor actually increase it

  • Ban reduced child wages which meant that poor families became even poorer

    • To make up for decline in their income, poorer families were forced to increase amount of work done by children

Trade and National Security

• If a good is vital for national security but domestic producers have higher costs than foreign producers, it can make sense for government to tax imports or subsidize production of domestic industry

  • Ex: supporting a domestic vaccine industry

    • In an ordinary year, there are with buying vaccines produced in another country, but if something like the 1918 flu swept across the country, it would be wise to have significant vaccine production capacity

Strategic Trade Protectionism

• It’s possible for a country to use tariffs and quotas to grab a larger share of the gains from trade than would be possible with pure free trade

• Who bears the burden of a tax?

  • Elastic = escape

    • The more elastic side of the market can escape (some) of the tax so the more inelastic side of the market bears more of the burden of a tax