Question

In the national interest argument. It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument has been made for commodities that are important to the U.S. economy as a whole, like oil. Discuss some arguments economists may raise against this.

Answer 1

The first argument against it, is the efficient utilization of resources on the basis of specialization of workers and resource abundance. It means that a country should produce only those goods, in that the country has lowest opportunity cost and then trade for the other goods. It will maximize the Consumption that cannot happen when national interest argument is applied as stated in the problem statement. The second argument is the nation's competitive advantage that says that a country should produce what it has as a competitive advantage in terms of resources, specialized infrastructure, workers and attractive conditions of the market in the country. It will help nation produce that can deliver competitive advantage, and rest of the goods will be imported. The third argument is the factor abundance. The country should only produce what it has in abundance. It will reduce the cost and develop competitive advantage. Other products will be imported.

So, these arguments are against the national interest argument, as it can reduce the output, increase the cost and make the process to be non-competitive.