Question

Identify the major fallacies of international trade

Answer 1

There are different major fallacies are as follows:

1. Imports are responsible for reduction in employment, creating burden to the economy

   It is a fallacy because imports bring competition and help consumers get the good quality at competitive prices. It makes domestic producers to be competitive and efficient. It happens due to international trade, so the given statement is a fallacy.

2. Tariffs and quotas can save jobs and protect the economy

   The statement is fallacy, because tariff and quotas create inefficiency among the domestic producers, makes consumers pay higher price and bigger section of disposable income. It makes less spending on other products and decrease the demand of these products. It creates unemployment. So, it is the tariff and quota that create unemployment.

3. trading is a zero sum game

Trade has different benefits to different trading partners. So, trading cannot have the same impact upon all the trading partners.