TRADE - ARGUMENTS AGAINST TARIFFS (AND PROTECTIONIST POLICIES IN GENERAL) Flashcards
what are the 5 arguments against tariffs and protectionsim in general
market distortion
prodcution inefficienies
retalliation
regressive
what are the 2 evaluations poitns for evla
size - as affcts impact on mkt
elasticity of demand and supply of tariff
explain market distortion
mkt before tariff/protectionsim doing good job at satisfying as many stkh as possible
tariffs cause £ to increase - higher £ = dwl of cs
consumers hinfered mssivley - not just cuase of high price but also loss of consumer choice
as QD in mkt has reduced , previously they could pick to buy from DS i.e something more exotic , higher uality from abroad
loss of cosnumer choice form higher price
loss of ocnsumer choice and satisfaction
explain production inefficienies
significant point
econ all ab efficenit allocation of scarcer resources
if thorugh tariffs/protectinos the AOSR worsened we have a aproblem.
left triangel = dwl in terms of world efficieny gains
we have allcoative inefficient
as ds proiucing extra unit sof q is waseful , they need a higher price to produce them as less efficieny
they produce at hgiher price compared to SW
inefificnet as shoudl be applicuing those resources to sw who have comp adv we assume
explain retalliation
if gov decide to impose t on certian imports coming in
they can expect retaliation rom nation you imposed it
and this will be much stronger
bad cuz it hurts cosumers more makes inefficenties worse
distorts real beenfits that can be gained from free trade
how can we loop in eval to retalliation
on one hand may see benefits of imposign tariff but if natin retaliates cost greater than beenfits
explain tariffs bein regressive
consumer bear burden on tariffs
many tariffs go on low priced items /essential studd those on low Y /poor tend to buy
e.g clothign and agriculture, fruit and veg
basic items low Y spend majority of y on
they suffer
so in that senes it hurts those on lower incomes more than those on higher incomes
in terms of distribution of Y and equoty - imposing tarfiff wirsen distribution of Y and equity
explai evla of elasticyt of d and supply
intention of tariff to reduce q of imports
if deamdn and supply v inelastic for various reasosns - quanity of supply and extensionof supply for domestic bs will increase by small amount
cotraction of d and reduction in D but not by mich
therfre fall in imports will be small
