Activities


1. Reading from  Protection or Free Trade

Here is an excerpt from a famous American economist with two first names.
Trade is not invasion. It does not involve aggression on one side and resistance on the other, but mutual consent and gratification. There cannot be trade unless the parties to it agree, any more than there can be a quarrel unless the parties to it differ.... Covilized nations, however, do not use their armies and fleets to open one anopther's ports to tarde. What they use their armies and fleets for is, when they qualrrel, to close one another's ports. And their effort then is to prevent the carrying in of things more than the bringing out of things -- importing rather than exporting. For a people can be more quickly injured by preventing them from getting things than by preventing them from sending things away. Trade does not require force. Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much the application of force as blockading squadrons, and their object is the same -- to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations seek to prevent their own people from trading. That protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.
Please answer the following questions.

  1. In the policy of "protectionism", who is being protected from what?
  2. Why does George think that importing is more important to a nation than exporting?
  3. What would a government have to do in order to promote free trade?
  4. Name two nations that the United States has blockaded in recent history.
  5. Do you think the free trade vs. protection argument is more complicated than Henry George makes it out to be? If so, how?

2. Speaking Out on International Trade

Below are seven "comments" by various speakers. Write a short counter-argument for each speech. Include one specific example for each to support your point of view.

1. When American shoe companies open factories overseas, in countries where labor is cheaper, shoe companies make greater profits, but shoe prices here remain the same, and American workers are out of jobs.
2. If some countries have the advantage of lower labor costs because they use child labor, have no minimum wage, no workman's compensation or insurance, no social security or unions, then America should have nothing to do with exploiting that labor. American companies should not have factories in those countries.
3. If all trade barriers were eliminated, then the United States would still find it difficult to compete in international trade. Lack of productivity from American workers stands as a major reason for this.
4. It has been estimated that to save one job in the auto industry by restricting Japanese imports, American consumers pay $160,000 in higher prices.
5. The American steel industry has been severely damaged by illegal foreign practices which violate American anti -trust laws. It is nice to talk about free trade, but, in reality, most nations receive trade subsidies and compete unfairly to protect their own industries.
6. If auto workers lose their jobs because of foreign imports, why can't they be retrained for industries where the United States has a shortage of workers, like micro-wave technology?
7. As long as Japanese companies continue to sell computer chips below cost and Japan refuses to allow the American semi-conductor business to enter her domestic market, the United States must retaliate by placing tariffs and quotas on selected Japanese products sold in America.

3. Comparative Advantage: The Island and the Continent

Please work thorough the necessary calculations, and fill in the blanks.

On the Island, workers can produce, in a given time, one bushel of widgets or two cases of gadgets. On the continent, because of superior technology and other factors, the same labor will produce two bushels of widgets or ten cases of gadgets.

Productivity: Island, 1 bushel or 2 cases
Continent, 2 bushels or 10 cases

Suppose 3,000 workers are employed in these industries in each place, as follows:

ISLAND:
2,000 workers produce ________ bushels of widgets;
1,000 workers produce ________ cases of gadgets.
CONTINENT:
2,500 workers produce ________ bushels of widgets;
500 workers produce ________ cases of gadgets.

But the islanders realize that they are not so very efficient at making gadgets. They set aside their ill-advised effort to compete in the gadget market. Instead, 250 workers are added to those producing widgets for home consumption, and 750 workers produce widgets for export.      Meanwhile, on the continent, entrepreneurs realize there's a lot more profit in gadgets than in widgets. So, 250 workers are shifted from the widget mills to state-of-the-art gadget factories. Of these, 225 workers produce gadgets for export.

.


ISLAND:
________ bushels of domestic widgets;
________ cases of imported gadgets.

CONTINENT:
________ bushels of widgets
( ________ of them are imported)
________ cases of gadgets.

Please answer the following questions.

  1. Even though the Continent has an absolute advantage in productivity, why does it benefit by trading with the Island?
  2. What would happen to this relationship if the Continent had a protective tariff on widgets?
  3. Should the Islanders borrow money to make their gadget production more effecient? Why or why not

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