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Globalization and Tariffs

Suppose that representative I.M. Wright just delivered a passionate speech at your college on the topic of tariffs. He argues tariffs are needed to:
A. Provide revenues to protect our young industries
B. Encourage Americans to buy U.S made products because doing so is patriotic
C. Protect Americans jobs and wages
D. Help us to attain a favorable balance of trade and balance of payments.

Do you agree with Representative Wright? Evaluate each of his major points and decide whether you consider it valid or invalid. Be sure to justify your position. What are the counterarguments to his major points and why?

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RESPONSE:

1. Do you agree with Representative Wright? Evaluate each of his major points and decide whether you consider it valid or invalid. Be sure to justify your position.

You will need to position yourself either in favor of tariffs as governmental controls (agree with Representative Wright) or use the counterarguments below as rationale to say they are not valid. To help you do this, let's go through the four points through presenting counterarguments, which you can draw on to form your opinion for this first question.

2. What are the counterarguments to his major points and why?

The following response is drawn from the article by Ross (2000) which is attached, who clearly sketches the various arguments for trade barriers, as well as presents compelling arguments against trade barrier due to the four arguments below. You might want to potion yourself along this camp, which argues against the validity of the following arguments.

A. Provide revenues to protect our young industries

Counterarguments:

According to Ross (2000), in order for the nation to engage in economic growth, some people insist that trade barriers are needed to protect developing industries from foreign competition. Without protection from large international firms, small domestic industries run a greater risk of floundering. The infant-industry argument states that industries that have potential to succeed, such as good transport facilities and well-trained workers, should have the chance to grow and expand under a protective tariff. The tariff would enable the firm to upgrade their products and create greater efficiency in production. Once the industry is firmly established, the tariff can be removed.

Even though this argument appears valid, it contains several flaws argues Ross (n.d): "It is very difficult at the onset to determine which new companies are going to prosper and which ones will fail. Often, firms with high potential have been turned down after asking for protection from the government (Perlman 33, in Ross, 2000). Why should one industry be denied protection from competition and another be given the opportunity to expand and grow? If given a fair chance, even companies that do not initially appear strong may indeed flourish and prosper under the right circumstances. Another problem with protective tariffs is the length of time that they are imposed. Once a tariff is placed on a product, it is not ...

Solution Summary

Referring to the case on the topic of tariffs, this solution evaluates and describes the four counterarguments. Supplemented with an informative article on the potential negative effects of trade barriers on the United States economy.

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