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Chapter 10

Arguments for and against Protection

Arguments for and against Protection This chapter has three purposes: To present a framework and a rule for evaluating arguments offered in favor of limiting imports, to apply the framework and rule to several prominent arguments for protection, and to examine the political processes that result in government policies toward imports. The framework allows us to look at situations in which the free market may not result in economic efficiency, because of distortions that result from market failures or from efficiency-reducing government policies.

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Slide21
知识点8
案例4
习题60

Knowledge Points

知识点

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The Ideal World of First Best

The framework allows us to look at situations in which the free market may not result in economic efficiency, because of distortions that result from market failures or from efficiency-reducing government policies. In the “first-best” world with no distortions, private marginal benefits (MB) to consumers who make buying decisions equal social marginal benefits (SMB), because there are no positive externalities or spillovers, private marginal costs (MC) recognized by sellers equal social marginal costs (SMC), because there are no negative externalities or spillovers, and all of these are equal to market price, because the market is perfectly competitive and there are no distorting government policies like a tax or a subsidy.

  • In an ideal or a “
  • first-best
  • ” world, all private incentives are aligned with benefits and costs to society as a whole.
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The Realistic World of Second Best

In situations in which the free-market outcome is second-best because of a market failure, there is a potential role for government policy to contribute to economic efficiency. We mention the approach of creating new property rights, but we focus in this chapter on the tax-or-subsidy approach to eliminate distortions in private incentives.

  • Private actions will not lead to the best possible outcomes for society.
  • Two major sources of distortions in an economy:
  • Market failures (externalities, monopoly, monopsony)
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Promoting Domestic Production or Employment

The specificity rule is powerful in its applications. Consider the situation in which there is too little domestic production in an import-competing industry, because of marginal external benefits from this production. What is the best government policy to address the distortion? A tariff can be used to increase domestic production, so it may be better than doing nothing, but it is not the direct policy, because it acts on imports directly, not on domestic production.

  • or Employment
  • Local production produces spillover benefits.
  • New worker skills and attitudes
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The Infant Industry Argument

The infant industry argument leads to another application of the specificity rule, as well as raising a set of other interesting issues. The argument is that import competition prevents an initially uncompetitive domestic industry from starting production. But, if the industry is shielded from foreign competition, it can begin production, and over time it will be able to lower its production costs, so that it becomes competitive.

  • A temporary tariff is justified because it cuts down on imports while the infant domestic industry learns how to produce at low enough costs.
  • Eventually the domestic industry will be able to compete without the help of a tariff.
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The Dying Industry Argument and Adjustment Assistance

Another argument in favor of protection is assistance to industries that are declining because of rising import competition. Moving resources out of an industry is costly. People who lose their jobs because of increased imports often have a difficult time finding new jobs and often suffer substantial declines in earnings.

  • Should government intervene to save a dying industry? If we are in a “first-best” world, the answer is no. Since the social value of anything is already included in private incentives, ordinary demand and supply curves already lead us to the socially optimal choice.
  • Trade adjustment assistance to workers and firms in import-threatened industries is a better policy, using the specificity rule, than, for example, a tariff, because adjustment assistance focuses on income losses, training, and worker mobility.
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The Developing Government (Public Revenue) Argument

3.One such set of conditions described in this chapter is the developing government argument. If the government is so underdeveloped that the gains from starting or expanding public programs exceed the costs of taxing imports, then the import tariff brings net national gains by providing the revenue so badly needed for those programs.

  • (Public Revenue) Argument
  • According to this argument, in poor, developing countries the import tariff becomes an important source of not just protection but also government revenue.
  • The government revenue can be spent on otherwise underprovided public investments like education, health, and infrastructure.
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The Politics of Protection

Arguments for and against Protection

  • The size of the gains for winners from protection, and how many individuals are in the group of winners.
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Government Policies toward Externalities

This chapter has three purposes: To present a framework and a rule for evaluating arguments offered in favor of limiting imports, to apply the framework and rule to several prominent arguments for protection, and to examine the political processes that result in government policies toward imports.

  • Tax-or-subsidy approach
  • Property-rights approach

Cases

案例与情境

Role playing can be used to bring the issues raised in ...

Role playing can be used to bring the issues raised in the chapter to life. For instance, the class can be divided in half, with each half taking the opposite side in a debate about an actual trade problem. One possible topic: To protect U.S. jobs and raise the low U.S. wages in the clothing manufacturing sector, the U.S. government should impose quotas or raise tariffs on imported clothing drastically.

查看原始摘录

Role playing can be used to bring the issues raised in the chapter to life. For instance, the class can be divided in half, with each half taking the opposite side in a debate about an actual trade problem. One possible topic: To protect U.S. jobs and raise the low U.S. wages in the clothing manufacturing sector, the U.S. government should impose quotas or raise tariffs on imported clothing drastically. Another possible topic: The Japanese government should sell its scarce rights to land international flights at its airports to the highest bidders, even if this means that some Japanese airlines go out of business. Yet another: Brazil should limit its imports of personal computers, in order to foster the development of its own personal computer industry. Current events (including Trump’s trade policies) can offer other topics. After playing the assigned roles in the debate, the students c

The chapter then examines several arguments in favor of protection that ...

The chapter then examines several arguments in favor of protection that involve national pursuit of “noneconomic objectives.” First, national pride gained by production of a product calls for a production subsidy as the least-cost way to achieve the objective. National pride in self-sufficiency calls for a tariff or other import limit, because in this case the objective is specifically to reduce or eliminate imports.

查看原始摘录

The chapter then examines several arguments in favor of protection that involve national pursuit of “noneconomic objectives.” First, national pride gained by production of a product calls for a production subsidy as the least-cost way to achieve the objective. National pride in self-sufficiency calls for a tariff or other import limit, because in this case the objective is specifically to reduce or eliminate imports. Second, providing for the national defense is usually least costly using a subsidy to domestic production capacity, leaving depletable resources in the ground, or building stockpiles. The U.S. tariffs on steel and aluminum imports imposed by President Trump in 2018 are an example of an excessively costly policy—in this case, the first of these three alternative policies, a subsidy to production or production capacity, would be less costly. For the latter two alternative poli

Another argument in favor of protection is assistance to industries that ...

Another argument in favor of protection is assistance to industries that are declining because of rising import competition. Moving resources out of an industry is costly. People who lose their jobs because of increased imports often have a difficult time finding new jobs and often suffer substantial declines in earnings.

查看原始摘录

Another argument in favor of protection is assistance to industries that are declining because of rising import competition. Moving resources out of an industry is costly. People who lose their jobs because of increased imports often have a difficult time finding new jobs and often suffer substantial declines in earnings. For example, research on the rapid increase in imports from China from the early 1990s to 2007 (the “China shock”) shows the large and enduring harm to U.S. workers and local communities. The marginal external benefit of continuing domestic production in a declining industry is avoiding these costs of moving resources to other uses. Again, a tariff can be used to maintain domestic production, and it may be better than doing nothing (so that the industry shrinks). But again the specificity rule says to attack the externality directly. A subsidy to domestic production wil

How Sweet It Is (or Isn’t): For a U.S. company that ...

How Sweet It Is (or Isn’t): For a U.S. company that makes jelly beans in the United States, U.S. policies that limit sugar imports increase sugar prices and raise the cost of obtaining the key input into its production. The U.S. firm would like to change US. policy, to lower the domestic price of sugar, for instance, by moving to or toward free trade in sugar.

查看原始摘录

How Sweet It Is (or Isn’t): For a U.S. company that makes jelly beans in the United States, U.S. policies that limit sugar imports increase sugar prices and raise the cost of obtaining the key input into its production. The U.S. firm would like to change US. policy, to lower the domestic price of sugar, for instance, by moving to or toward free trade in sugar. On its own, the firm probably cannot have much impact politically, because anything it can do would be too small. The firm could join the Coalition for Sugar Reform and contribute to the Coalition’s efforts to oppose protectionist U.S. policies that limit sugar imports. However, this group’s efforts have had little effect, because the sugar producers are better organized and willing to spend more (campaign contributions and lobbying) to maintain the existing import-limiting policies. The U.S. firm does have some other options. Firs

Exercises

习题与答案

题目 1The Ideal World of First Best

Which of the following is an expected effect of a tariff or a nontariff barrier (NTB) on a product?

  • A) A decrease in the domestic production of the product
  • B) An increase in the employment of labor and other resources used in the import-competing industry in the tariff-imposing country
  • C) An increase in domestic consumption of the imported product
  • D) A decrease in government revenue

正确答案：B | An increase in the employment of labor and other resources used in the import-competing industry in the tariff-imposing country

难度：1 Easy Bloom's：Remember

题目 2The Ideal World of First Best

If there is something extra bad about local consumption of a product, then a tariff can be good for the country because

  • A) the tariff makes all residents richer.
  • B) the tariff brings down the domestic price of the product.
  • C) the tariff leads to higher domestic price for the product.
  • D) the tariff revenue is invested in the production of substitute products.

正确答案：C | the tariff leads to higher domestic price for the product.

难度：1 Easy Bloom's：Remember

题目 3The Ideal World of First Best

In a "first-best" world

  • A) each economy is self-sufficient enough not to indulge in free trade.
  • B) free trade is economically efficient.
  • C) free trade benefits only the consumers of the importing country.
  • D) free trade benefits only the exporting nations.

正确答案：B | free trade is economically efficient.

难度：1 Easy Bloom's：Remember

题目 4The Ideal World of First Best

Which of the following is valid for a "first-best" world?

  • A) Social Marginal Benefit (SMB) > Price (P) = Buyer's Private Marginal Benefit (MB) = Seller's Private Marginal Cost (MC) = Social Marginal Cost (SMC)
  • B) Social Marginal Cost (SMC) > Price (P) = Buyer's Private Marginal Benefit (MB) = Seller's Private Marginal Cost (MC) = Social Marginal Benefit (SMB)
  • C) Price (P) = Buyer's Private Marginal Benefit (MB) = Seller's Private Marginal Cost (MC) = Social Marginal Cost (SMC) = Social Marginal Benefit (SMB)
  • D) Social Marginal Benefit (SMB) > Social Marginal Cost (SMC)

正确答案：C | Price (P) = Buyer's Private Marginal Benefit (MB) = Seller's Private Marginal Cost (MC) = Social Marginal Cost (SMC) = Social Marginal Benefit (SMB)

难度：2 Medium Bloom's：Understand

题目 5The Ideal World of First Best

If Social Marginal Cost (SMC) > Price (P) = Buyer's Private Marginal Benefit (MB) = Seller's Private Marginal Cost (MC) = Social Marginal Benefit (SMB), it implies that

  • A) the product is oversupplied.
  • B) there is an excess demand for the product.
  • C) the socially optimal amount of the product is supplied.
  • D) firms are not maximizing profits.

正确答案：A | the product is oversupplied.

难度：2 Medium Bloom's：Understand

题目 6The Ideal World of First Best

If Social Marginal Benefit (SMB) > Price (P) = Buyer's Private Marginal Benefit (MB) = Seller's Private Marginal Cost (MC) = Social Marginal Cost (SMC), it implies that

  • A) too much of the product is supplied.
  • B) not enough of a good is being demanded.
  • C) the socially optimal amount is supplied.
  • D) the buyers are not maximizing utility.

正确答案：B | not enough of a good is being demanded.

难度：2 Medium Bloom's：Understand

题目 7The Realistic World of Second Best

In a "second-best" world

  • A) tariffs are economically optimal.
  • B) private actions are dictated by government agencies.
  • C) social marginal cost of a transaction equals social marginal benefit.
  • D) private actions do not lead to the best possible outcomes for society.

正确答案：D | private actions do not lead to the best possible outcomes for society.

难度：1 Easy Bloom's：Remember

题目 8The Realistic World of Second Best

Which of the following refers to the positive or negative effect on parties who are not directly involved in a transaction?

  • A) Invisible hand
  • B) Incentive distortions
  • C) Consumption effect
  • D) Externality

正确答案：D | Externality

难度：1 Easy Bloom's：Remember

题目 9The Realistic World of Second Best

Which of the following statements reflects a situation in which there are external benefits?

  • A) John paints his house and cleans his paintbrushes in the nearby stream.
  • B) John pays 5 percent of his income as taxes.
  • C) John's decision to get vaccinated for smallpox reduces the chances that his neighbor Pete will get smallpox.
  • D) John sells his car to his neighbor Pete at half the first-hand price.

正确答案：C | John's decision to get vaccinated for smallpox reduces the chances that his neighbor Pete will get smallpox.

难度：2 Medium Bloom's：Understand

题目 10The Realistic World of Second Best

Which of the following statements reflects a situation in which there are external costs?

  • A) Suzanne invites her neighbors to a party on her birthday.
  • B) Suzanne paints her house and landscapes her yard. Her newly beautified house and yard help her neighbors to sell their house for more than the asking price.
  • C) Suzanne pays for a professional fireworks show for her family. Her neighbors also enjoy the show.
  • D) Suzanne dumps her household garbage around the corner of the street.

正确答案：D | Suzanne dumps her household garbage around the corner of the street.

难度：1 Easy Bloom's：Remember

题目 11The Realistic World of Second Best

Which of the following is a plausible solution to a distortion?

  • A) Centralizing the privately owned enterprises
  • B) Shutting down any industry which is contributing to atmospheric pollution
  • C) Imposing a tax or subsidy on the activity if the social marginal cost or the social marginal benefit exceeds the market price
  • D) Imposing an importation ban on manufactured goods

正确答案：C | Imposing a tax or subsidy on the activity if the social marginal cost or the social marginal benefit exceeds the market price

难度：1 Easy Bloom's：Remember

题目 12The Realistic World of Second Best

Suppose manufacturing of paper results in substantial ground-water pollution. One possible policy that can be used to reduce the inefficiency caused by this externality is

  • A) to subsidize the production of paper by the domestic firms.
  • B) to impose a tax on the production of paper.
  • C) to raise tariff barriers on paper imports.
  • D) to provide tax benefits to the firms exporting paper.

正确答案：B | to impose a tax on the production of paper.

难度：1 Easy Bloom's：Remember

Manual Preview

教师手册摘录

Arguments for and against Protection

This chapter has three purposes: To present a framework and a rule for evaluating arguments offered in favor of limiting imports, to apply the framework and rule to several prominent arguments for protection, and to examine the political processes that result in government policies toward imports.

The framework allows us to look at situations in which the free market may not result in economic efficiency, because of distortions that result from market failures or from efficiency-reducing government policies. In the “first-best” world with no distortions, private marginal benefits (MB) to consumers who make buying decisions equal social marginal benefits (SMB), because there are no positive externalities or spillovers, private marginal costs (MC) recognized by sellers equal social marginal costs (SMC), because there are no negative externalities or spillovers, and all of these are equal to market price, because the market is perfectly competitive and there are no distorting government policies like a tax or a subsidy. When external costs, external benefits, monopoly power, monopsony power, a distorting tax, or a distorting subsidy exists, the market usually does not yield the first-best outcome, because social marginal benefit does not equal social marginal cost.

In situations in which the free-market outcome is second-best because of a market failure, there is a potential role for government policy to contribute to economic efficiency. We mention the approach of creating new property rights, but we focus in this chapter on the tax-or-subsidy approach to eliminate distortions in private incentives.

Slide Outline

课件线索

  • The Ideal World of First Best
  • The Realistic World of Second Best
  • Government Policies toward Externalities
  • The Specificity Rule
  • Promoting Domestic Production
  • Two Ways to Promote Import-Competing Production
  • The Infant Industry Argument
  • How Valid is It?
  • The Dying Industry Argument and Adjustment Assistance
  • The Developing Government
  • Other Arguments for Protection: Noneconomic Objectives
  • Basic Elements: The Politics of Protection

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