Question

Labor union maintain that protectionism is necessary to preserve and encourage the growth of American jobs. Opponents of labor union believe that protectionism rewards and encourages inefficiencies while increasing costs to consumes in order to pay for the inefficiencies.

Answer 1

Labor union wants a protectionist policy  w.r.t. the international trade that can save Jobs in the USA. But, it is the biggest fallacy regarding the international trade. When, protectionist policy is implemented, then redistribution of income takes place. As a part of it, consumers pay higher price of good that are protected and spend a significant portion of the disposable income, but they spend less upon the other products. It means that demand of other products decreases and it makes firms (producing other products) to lay off people. It increases the unemployment. Hence, protectionist policy, may save few jobs in one sector, but creates unemployment in other sectors. Besides, domestic producers never become ready for the international trade and inefficiency is maintained, making consumers to suffer. At the same time, other nations apply retaliation and they also stop buying US goods. It causes loss of forex in the USA. As a result, loss is more than the gain, if protectionist policy is implemented.