Question

Compose an argument against the following statement from Joe, "I think we should just close all trade with all foreigners and let our people have more jobs!"

Answer 1

Trade is one of the most important sources of growth. Trade helps the economy to specialize in what they produce more efficiently and allow them to sell it to the customers who valued them most. This ensures lower cost of production and higher profit margins. Trade also enables the economy to consume beyond its productive capacity. Hence, trade increases country’s income and ensures faster growth.

Trade restriction is the obstacle to free trade in terms of tariff, quota and other barriers to trade. These trade barriers act against the benefit of free trade. The trade barrier generates losses to the society and retard economic growth. The trade does not destroy jobs and neither protects the domestic industry from loss in the long run.

Trade restriction creates losses to the society. If the foreigner cannot sell their product, they cannot acquire the home currency needed to buy the home products. This hurts the export sector. The export producing industry experiences falling profit and decrease in employment. Although, protection retains the jobs in import competing sector, the employment in export sector decreases due to protection. On the other hand, if any industry buys the input from foreigners, the protection increases the price of these inputs. The cost to the industry increases and they lose their competitiveness in global market. For all these reason, the trade restriction is not at all desirable to protect the prosperity of a nation.