Question

In: Economics

Suppose we refused to sell goods to any country that reduced or halted its exports to...

Suppose we refused to sell goods to any country that reduced or halted its exports to us. Who would benefit and who would lose from such retaliation? Can you suggest alternative ways to ensure import supplies? Are there any particular imported commodities that you or your firm rely on? What has happened to the supply of these imports over the years?

Solutions

Expert Solution

Other suppliers (countries) will profit from this scenario because other suppliers (countries) will meet the present demand for the products. Countries that refuse to sell products to any other nation will lose their market share in that nation. The multiple alternative methods of securing import supplies include establishing diplomacy, political obstacles, setting elevated quotas, local market anti-advertising and other suppliers ' subsidies, etc.

The U.S. used export bans on particular products at different times to coerce other nations. President Nixon, for instance, established a ban on soybean shipping to Japan. The Japanese have never forgotten and now believe that statements such as "you can purchase all the food you need on the open market" are simply an effort to make them susceptible to further coercion. That was bad enough, but if Japan attempted to retaliate, it would have been worse for both the U.S. and Japan.

There are very few supplies of imports that are essential enough to worry about. But if you use an export threat to avoid import disturbance, the exports you'd be withholding should be at least as essential as the goods you're scared of. Under international law, economic sanctions, such as blockades and embargoes on exports, are aggressive acts. Be ready to begin a conflict if you succeed in denying a strong nation a good that it really requires. If you're strong enough to do that, first of all, it's unlikely that anyone will embargo you. If you don't, you really don't want to do it.

Develop various sources so that you can be coerced by no one source. Make sure these sources can reach you through different channels. Develop sufficient storage ability so that for a substantial length of moment you can do without imports. This was the concept behind the United States ' "Strategic Petroleum Reserve." Develop other products that perform the same function.

Cutting or restricting IMPORTS, not exports, is the way to promote balanced trade. An import tariff would deter imports and increase government revenues to lower taxes. It would be possible for domestic sectors to develop and employment to return to the US.

By not buying theirs, we are retaliating against countries that don't buy our exports, so they don't get our cash. That's hurting them. Refusing to sell them just make them laugh at us because they are so dumb and not taking their cash.


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