Economics . (Infant industry, NAFTA, smuggling, etc.) - Assignment Example

Why is the "infant industry" protectionist argument perhaps valid for some situations? The goal of “infant industry” protectionism is that a formof protection must exist for new industries that exist throughout the world. There is fierce competition between countries with older industries and countries with industries that are in their infant stages. Ultimately, this is valid because it will help create a security blanket for developing industries to expand and grow while 2. What is one arguments for and one argument against NAFTA?

One argument in favor of NAFTA was that the free trade act would help to improve the financial quality of life for Mexicans within their own country that it would reduce the immigration problems that Mexico and the United States were experiencing with dissatisfied Mexican citizens leaving Mexico to go to the economically stable United States. One argument against NAFTA is that NAFTA has actually had very little impact on improving the unemployment rates or increasing Canada, Mexico and United States GDP as previously predicted.

This trade act has not succeeded in increasing the economic position for Mexico as the peso crisis of 1994 has tarnish the value of the peso and has made the overall economic prowess of the country diminish. Furthermore, NAFTA has not eliminated the potential for a recession to impact the unemployment rates and we have seen a drastic increase in unemployment throughout the U.S. and Canada in recent years. 3. Evaluate this statement: "If a country bans an import, smuggling is inevitable. We should welcome smuggling because it increases consumer welfare.

" This statement is flawed because it does not take into consideration that many importation restrictions occur to protect the domestic economy. This means that the domestic products are already being produced here at home and to protect that economy from the competition of foreign-made products, a ban on importation may occur. Furthermore, this does not necessarily mean that true competition does not exist domestically or that the consumers’ welfare is tarnished because of a domestic monopoly and further price monopolization is occurring.

Smuggling is not a direct result of an importation ban. 4. Discuss this statement: "Free traders win the economic arguments, but protectionists win the votes." Protectionists win the votes because they often discuss topics that are in the best interests of everyone. For instance, many protectionist arguments are to protect new industries or industries that may be failing in order to lend a helping hand. This argument sounds good to the voters because it makes them feel that the protectionists actually care about their vested interests and the interests of “the little guy”.

Meanwhile, free traders win the economic arguments because they are interested in what is best from an economic perspective. In this case, the “survival of the fittest” mentality is best achieved in a free-trade environment and industries will survive or fall of their own accord as opposed to surviving simply because of the help of government regulation. 5. Do you believe that American consumers should boycott goods made by exploited workers in Less Developed Countries? Explain why this might or might not work.

American consumers should definitely boycott goods made by exploited workers in less developed countries. Exploited workers are taken advantage of by companies and countries that do not have the same laws to protect employees as the United States. With the growing threat of globalization causing havoc on the U.S. economy and diminishing the value of the dollar as well as hurting the ability for the United States to compete economically with countries throughout the world on an international level, the American consumers must take action and seek to level the playing ground.

Products made by exploited workers in less developed countries will cost much less at a similar product quality as that found in the United States, but it will also cause much more damage to the unemployment crisis we have experienced for much of the last five years. This might not work because consumers are often concerned primarily about the overall cost of what they have to pay for a product as opposed to the cost that will occur when purchasing that product may put their friend or neighbor out of a job.

This cost is not found next to the price tag at Wal-Mart. 6. Suppose Country A can produce 200 toys or 400 pineapples per day, while Country B can produce 300 toys or 900 pineapples per day. Where do the comparative advantages lie? Should trade take place? Country B is able to produce much more product in total than that of Country A for both toys and pineapples. However, Country B is clearly better skilled at producing pineapples than toys as the amount of pineapples to toys production is 3:1 in favor of pineapples.

Therefore, it is in the best interests of these two countries to engage in trade which will allow for Country B to focus primarily on producing pineapples and allow County A to focus on producing toys. Country A will receive the maximum in trade revenue for its production, while Country B will have enough internal inventories to trade with Country A as well as have more pineapple on hand to trade with Country C or D as well along with receiving the required amount of toys. This is a win-win scenario for both countries.