Question

Explain and evaluate the validity of the military self-sufficiency argument for trade protection.

Answer 1

The basic argument is that domestic industries that are vital to national defense should be protected against foreign competition because otherwise the industries will not be able to compete or be economically viable.Nations do not want to be dependent on other nations for national defense. The argument is generally one of the need for military self-sufficiency as opposed to economic efficiency.The problem with the argument is that nearly every industry is critical in one way or another to national defense. It is difficult to select “defense” industries to protect. Every industry can claim that it is directly or indirectly vital to national defense. Also, imposing tariffs imposes costs only on those consumers who purchase an industry’s products because the prices of those products will be above competitive levels.Thus, only the people who buy the protected products bear the burden of protecting the domestic industries considered vital to national defense. It would be more economical and more equitable for government to subsidize those industries that are deemed vital to national defense.