4. Problems and Applications Q4 Identify which of the arguments for restricting trade that each of the following rebuttals directs against. Rebuttals The Jobs Argument The National-Security Argument The Infant-Industry Argument The Unfair-Competition Argument The Protection-as-a-Bargaining-Chip Argument (A) The gains of the consumers from buying imports at the low price subsidized by foreign governments would exceed the losses of domestic producers. (B) Companies may exaggerate the degree to which their products are essential to national defense in order to obtain protection from foreign competition at the expense of consumers. (C) The country may be forced into deciding between implementing trade restrictions as threatened, which would make the society as a whole worse off, or backing down on its own threat, which would cause it to lose credibility in foreign affairs. (D) Opening up to free trade may impose hardship on some workers in the short run, but it also creates jobs in industries in which the country has a comparative advantage and enables the country as a whole to enjoy a higher standard of living.

(A) The gains of the consumers from buying imports at the low price subsidized by foreign governments would exceed the losses of domestic producers. - The Unfair-Competition Argument

Some Governments subsidise production for their companies which means that their companies are able to sell goods cheaper than the producers in the countries they export to. This is considered Unfair competition.

B) Companies may exaggerate the degree to which their products are essential to national defense in order to obtain protection from foreign competition at the expense of consumers. - National-Security Argument

Some goods produced by domestic producers need to be protected for national defense purposes and sometimes some of these producers exaggerate the importance of their goods so that the Government can protect them from foreign competition thus enabling them to charge consumers higher prices.

(C) The country may be forced into deciding between implementing trade restrictions as threatened, which would make the society as a whole worse off, or backing down on its own threat, which would cause it to lose credibility in foreign affairs. - The Protection-as-a-Bargaining-Chip Argument

Sometimes a country might threaten to impose restrictions for instance the United States on China which would make things more expensive for Americans and if they do not then it would look like China won the argument which would make the US lose face.

(D) Opening up to free trade may impose hardship on some workers in the short run, but it also creates jobs in industries in which the country has a comparative advantage and enables the country as a whole to enjoy a higher standard of living. - The Jobs Argument

David Ricardo's Comparative Advantage principle believes that free trade will lead to more jobs in the country because the country will be able to properly harness those goods it is better at producing.