International Trade Debate

International Trade Debate

Principles of Economics (XECO/212)

April 6, 2012

Hamsa Wilson

Axia College of University of Phoenix

International Trade Debate

There is just a debate with international trade. When buy something I always look at the labels to see where in was made. There are not a lot of thing made in the U.S. Therefore, the U.S must place high tariffs and use quotas to restrict trade with foreign countries. Tariff is, “a tax on goods produced abroad and sold domestically” (Mankiw, 2007, p. 184). A quota is a limit on the quantity of a good, produced abroad and sold domestically. The protection of the U.S economically is why tariffs and quotas were developed and this will maintain a healthy trading relationship with other countries.

Nevertheless, there are some benefits and losses from tariffs and quotas. The domestic price equals the world price before there were tariffs. With the tariff, a country can sell their product for the world price plus the amount of the tariff. “Because the tariff raises the domestic price, domestic sellers are better off, and domestic buyers are worse off. In addition, the government raises revenue.” (Mankiw, 2007, p. 184).

“There are winners and losers when a nation opens itself up to trade, but the gains to the winners exceed the losses of the losers” (Mankiw, 2007, p. 188). There are more benefits of international trade. “Trade gives consumers in all countries greater variety from which to choose. “Trade gives firms access to larger world markets and allows them to realize economies of scale more fully” (Mankiw, 2007, p. 188).

Works Cited

Mankiw, N. G. (2007). Principles of Economics (4th ed.). Mason, OH: South-Western Cengage Learning.