Trade and Politics How does this confusion persist? 1) Benefits from trade are subtle and counter intuitive to some, 1) Politicians who are good talkers exploit people lack of knowledge and fears of trade 2) Beneficiaries (consumers and exporting firms) diffuse and therefore it is not worth enough to lobby in favor of free trade 3) Losers (import competing firms and markets) are concentrated (not diffuse) and find it worth enough to spend a lot of money on lobbying (e.g. steel companies and unions) Good example of Political economy :- Presidents of US usually favor trade (e.g. Clinton and Bush)(Obama ?)- Congress usually favors protectionism Because Import Industries are harmed by trade, they lobby Congress for Forms of Protection:- Tariffs (tax on imports)- Quotas (ceiling in imports)- Subsidies from government- “Anti-dumping” rules “Crazy” Arguments made: 1) Help exploited foreign workers who work for lower wages and have poor working conditions (by taking their jobs away) 2) Benefit environment (promotes starvation but at least it will occur in an environment thats
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