Question

International trade and the "outsourcing" (or "off-shoring") of jobs to workers in other countries have increased dramatically over the last 50 years, primarily because of advances in transportation and communication technologies and reductions in "trade barriers" such as import tariffs or quotas. Should our government never, sometimes, or always restrict international trade and the outsourcing of labor? Justify your position using economic reasoning. Who would gain and who would lose from any such restrictions?

Answer 1

By economic logic, the more freely factors of production and goods circulate, the better. This is because in a free capital mobility economy without customs barriers, productive efficiency will be achieved to its greatest degree. By contrast, products will become cheaper and more competitive, benefiting consumers as a whole. For example, if a product is produced domestically because there are barriers for the firm to move to another country to use cheaper labor, production will be less efficient.

The same applies to cases where import barriers are adopted to bar the entry of products manufactured in other countries, under the justification of protection of the national industry. Economically, if a country can supply the products at a lower price than the host country, it is better to import this kind of goods, as there will be a consumer benefit. In real life, however, things do not work according to economic logic. Political logic still prevails and regulations exist to bar the transposition of labor and various trade barriers.