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In: Economics

Choose between either the Labor argument and the National Security argument as one of the arguments...

Choose between either the Labor argument and the National Security argument as one of the arguments countries generally use to justify protection for a particular industry. Describe the argument and any inherent problems with it. Is the argument primarily an economic or a noneconomic one? Question 2 - Your opinion only. Describe “traditional knowledge” and how do you think it relates to current trade issues about intellectual property rights protection

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Expert Solution

Question 1:

Labor argument : In this argument it is stated that international trade which claims that foreign competition based on low wages harms the domestic economy . This argument is used to protect domestic industries from cheaper imports .

National Security argument : This is the most common arguments supporting protection , also called the national defense argument. This argument suggests that it is necessary to protect certain industries with a tariff, to assure continued domestic production in the event of a war .

Let us elaborate the labor argument . Foreign trade often leads to import of cheaper variety of goods than produced in domestic market . Let us take cloth as an example . Suppose in Africa labor is very cheap or wages are very low . So cloth manufactured in Africa will be cheaper than in US where wages are higher relatively . So this African cloth if imported into US , make US cloth industry out of work , US cloth producers are forced to cut down on wages to compete with cheaper imports . So free international trade ensures equilibrium wages all over the world .

The inherent problem is that the domestic industries can specialize in the good in which it has comparative advantage and make profits from that . As for example US can specialize in computers and start to manufacture and export computers and stop manufacturing cloth . But low skilled labor required for cloth may not be able to adapt with production of computers , so training or education is required .


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