Question

consider the impact of quotas and tariffs on trade. Does U.S. immigration policy serve as a sort of trade regulation to artificially inflate labor rates? Explain the similarities.

Answer 1

In international trade, governments intervene for various purposes, most of them in the name of protection of domestic industries.

There are many devices to impose restrictions on imports. Two of the most prominent of these devices are quotas and tariffs on trade. Tariff is a certain tax on imports whereas quota is a quantity limit set on imports.

Quotas and tariffs, have significant impact on restricting imports, thereby helping the domestic infant industries against foreign competition, also these devices help create domestic employment in the country which keeps the electorate happy.

However, consumers are the ultimate losers, who have to pay higher prices for the same products.

US immigration policy is skewed towards allowing immigration of highly skilled people from other countries with significantly lower wages, which leads to these immigrants getting higher wages in the US.

However, putting severe restrictions on immigration of low skilled or unskilled people from poor countries keeps domestic wages in the US artificially high in those sectors where these people could be employed, leading to higher business costs for the domestic companies due to high wages.This also leads to consumers paying higher prices for the domestically produced goods and services.

Thus, we can see that the similarity is that the government regulations to protect domestic interests of producers and sellers forces the domestic companies to keep prices higher than otherwise. Although, consumers have to bear the brunt of these higher prices.