QUESTION 2: Whose interests should be the paramount concern of government trade policy - the interests of producers (businesses and their employees) or those of consumers? ANSWER 2: The long run interests of consumers should be the primary concern of governments. Unfortunately consumers, each of whom may be negatively impacted by only a few dollars, are less motivated and effective lobbyists than a few producers that have a great deal at stake. While in some instances it could be argued that domestic consumers will be better off if world-class domestic producers are nurtured and allowed to gain first mover advantages in international markets, it is doubtful that the government will be better than international capital markets at "picking winners", and will more likelypick the firms with the greatest political clout. While employees may well lose jobs if there are more efficient foreign competitors, some would argue that this is just the nature of competition, and that the role of government should be to help these employees get jobs where they can be efficiently employed rather than to protect them from reality in inefficient firms. QUESTION 3: Given the arguments relating to the new trade theory and strategic trade policy, what kind of trade policy should business be pressuring government to adopt? ANSWER 3: The implications of the new trade theory and strategic trade policy for businesses are that firms in “new” industries should seek subsidies and other forms of governmental assistance to help them achieve economies of scale and first mover advantages. It appears clear that the best policy is to press for the unabated free flow of goods across national boundaries.79
QUESTION 4: You are an employee of an U.S. firm that produces personal computers inThailand and then exports them to the U.S. and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at that time were Malaysia and Hong Kong. The US government decides to impose punitive 100% ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U.S. exports to Thailand. How do you think your firm should respond? What does this tell you about the use of targeted trade barriers?
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