Question

why should U.S. trade with other countries: 1) the conclusions of the Ricardian and H-O models to argue why the U.S. should trade with other countries, even when some sectors (import-competing industries) might be hurt by free trade; (2) Will more protectionism benefit or hurt this country? Why? (3) People often cite job losses as a potential problem with free trade. Is this a valid argument against free trade? Why or why not?

Answer 1

1.

The USA should trade with other countries, even if some sectors might be hurted, because gains from the trade is much bigger than the losses from the sufferings caused to some sectors. Besides, the import of goods  to the USA forces the domestic players to become efficient, competitive and deliver quality products. It makes consumers to be the ultimate winner. So, USA should trade and domestic sectors should improve to compete in the international market.

2.

Protectionism will hurt this country, because firms in the protected sectors, will remain inefficient and put high prices on goods. It will make consumers to pay more and spend more on these goods of protected sectors. As a result, demand for other sectoral goods suffers and unemployment grows in those sectors where protection is not given. So, the economy suffers due to the protectionism.

3.

It is not a valid argument, because it is the protectionism that creates redistribution of income and job loss takes place in those sectors that are not protected due to lower demand for goods of those sectors. when free trade happens, then investments take place and new jobs are created. Further, firms reach out to new markets and they require people. So, jobs are created due to free trade and people should take advantage of it.