Question

1. Why do you think labor standards and working conditions are lower in the low-income countries of the world than in countries like the United States?

2. You have just been put in charge of trade policy for Malawi. Coffee is a recent crop that is growing well and the Malawian export market is developing. As such, Malawi coffee is an infant industry. Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee.

What sorts of policies will you enact? Explain.

Answer 1

1 These countries are too poor to concentrate on labour standards and working conditions. The labour in these countries can hardly make both ends meet and try to work where they find the job. They care more about survival than about labour standards. Also in these countries regulations and laws are not there to implement labour standards. Even if there are, there is not good implementation Some countries consider lower standards as comparative advantage in the sense that the cost of production in these countries is less due to low standards. This is quite unethical.

2 since the industry is in infancy I will implement tariff protection but only for very short period of time till the domestic producers acquire sufficient capacity to compete on their own. I will not implement large tariffs but only such tariffs which provide some minimum level of protection I agree that protection is not solution and world welfare will be increased by competition but providing some initial protection for nascent industry can be tolerated in short run. The ultimate goal is to compete without protection