Question

Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is such competition “unfair?” Do you think that this argument is in the best interests of (a) the unions, (b) the people they represent, and/or (c) the country as a whole?

Answer 1

According to the theory of comparative advantage, countries should specialise producing those products which can be produced and marketed effectively and import those products from other countries which can not be produced in their land more effectively. So, theory of comparative advantage always support for the importation of goods from countries which specialise in the production function of certain goods at lower costs. So countries get the chance to stimulate their economy with open trade where they can import products which are not produced domestically and export goods where they have expertise.

If we see the above statement, the opposition of Unions in developed nations are bizzare from the economic point of view as low wage countries specialise in the production of goods which are not produced in the developed nations at lower costs due to lower labour charges. Developed nations hence will benefit from the imported items from the lower-wage countries as the production costs of those goods will be higher in these countries and are in the best interests of consumers. So open trade will help developed countries to boost their economies by importing goods from countries which are more efficient in making labour intensive goods in the long run. Implementing trade barriers will increase the costs of imported goods which might help some industries to develop in the domestic market but they would end up supplying lower quality products with higher prices and less variety. So importing goods from lower wages countries by developed nations can not be termed as unfair competition.

So this argument can be in the best interests of unions as though consumers can enjoy the best quality imported products at lower prices, it affects some industries negatively. The domestic industries producing the same products face losses due to their lower quality items with higher prices. This lead many industries to completely shut down or lay off their workers. So Unions might have the fear of losing their jobs which make them to oppose free trades.