Question

• Suppose someone makes the following statement in support of introducing barriers to trade for importing men’s clothing into Canada:

  The garment workers in the developing countries are barely paid a dollar an hour and no benefits, whereas the minimum wage in Canada is eight times or more high than that. It is obvious that we cannot compete with the cheap labour in those countries. Therefore, we should impose high enough tariffs for the imports from those countries to make a level playing field for our workers.

  • What are some of the reasons that workers in developing countries are paid less than Canadian workers?

  • Explain why the argument presented is not a sound economic argument for trade protection.

Answer 1

-The workers in developing countries are paid less than canadian workers because in developing productivity is low that affects their wages.Most of those working in developing countries work in the private sector not the public sector, a large majority of those who work in private sector are not registered with the government and therefore do not recieve job related social protections.Nine out of ten workers in the developing world are found in the private sector, sometimes it is hard to keep this fact in mind because so many of the statistics and so much of the policy attention is paid to formal sector.

- The argument presented is not a sound economic argument for trade protection because trade raises the amount that an economy can produce by letting firms and workers play to their comparative advantage, trade will also cause the average level of wages in an economy to rise. workers who can produce more will be moredesirable to employees which will shift the demand for their labor out to the right and increase wages in the labor market. By contrast barriers to trade will reduce the average level of wages in an economy.