High Tariff or Low TariffPosted by: Clukk
Tariffs are the taxes on goods imported into the country. A high tariff (also known as a protective tariff) is used to block goods from entering a country. A low tariff is used to make money for the government.
I want high tariffs because it will instigate self-sufficiency with a boom in factories which create many jobs for the unemployed. We may be charged with high tariffs by other nations, but once they see that we have had engineered better products than them, they will be begging to trade with us with our high tariffs in place. Also, this may mitigate our national debt.
I want low tariffs because it is the most economically efficient policy. And look at countries that have tried self-reliance, Cuba, North Korea, China (prior to the cultural revolution). They did very poorly and were very inefficient. Now, I will use the Theory of Comparative Advantage to prove why this is the case. Take, for example, the two countries England and France. First suppose that it takes only 5 days for England to make a car and 5 days for them to grow a fruit. Also suppose it takes France 20 days to make a car and 10 days to grow fruit. Now suppose that both England and France try for "self-reliance" and either restrict or ban trade (for simplicity, lets suppose they ban trade). Further suppose that each country has 40 days to come up with the most efficient outcome. Now, with all the details in place, lets suppose England decided to spend 20 hours producing fruit (4 fruits) and 20 hours producing cars (4 cars). Then suppose that France does the same, spending 20 hours producing fruit (2 fruits) and 20 hours producing cars (1 car). The total productivity of the two nations is 5 cars and 6 fruits. However, now suppose that both governments follow a different policy plan, they both have unrestricted free trade. This allows the two countries to produce what they produce best at (what they have a comparative advantage in) and then trade to make the difference. So now suppose that England uses 30 hours to produce cars (6 cars) and 10 hours to produce fruits (2 fruits). Further presume that France uses all 40 hours to produce fruits (4 fruits). The total productivity of the two nations is 6 cars and 6 fruits, as opposed to 5 cars and 6 fruits. You can further edit the example to make England use 25 hours to produce cars (5 cars) and 15 hours to produce fruits (3 fruits), making the total productivity of the two nations 5 cars and 7 fruits. The reason why this is possible is because each are allowed to trade to make up the difference in local/national production, and thus each can produce the good they are best at producing. Note than when we say produce the good they are best at producing, we mean in terms of comparative advantage, not absolute advantage. In this example, the opportunity cost of producing 1 car for England is 1 fruit, whilst for France the opportunity cost of producing 1 car is 2 fruits (and in reverse, the cost for England to produce 1 fruit is 1 car, and for France it is 1 fruit for half a car). Thus, England has a comparative advantage in producing cars and France has a comparative advantage in producing fruit. Thus, in conclusion, free trade is the most efficient. In my example, it allowed total production to be 6 cars 6 fruits (or 5 cars 7 fruits) rather than 5 cars 6 fruits. The reason why production wouldn't be the same without trade is that neither country can trade to make up for their lack of cars/fruit, so people have no motivation to produce to their countries comparative advantage. And finally, lets look at the extreme of this situation. Suppose now that each state passes a law in which it will not trade with any other state. Do you think that this will be beneficial? And if you say it is different, I ask you why is it different at the state level compared to the national level?