Question

avid Ricardo was the first economist to elaborate the theory of comparative advantage in his book On the Principles of Political Economy and Taxation. Ricardo wrote: Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole . . . It is this principle, which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England. (1817, p. 188) Read more at On the Principles of Political Economy and Taxation Think about the 10-year historical period you chose for your final project. Identify trade policies of the time and discuss the following points: My historical period 1980/1989 What are the main goods and services the United States traded internationally? What trade barriers were in place during that decade? What are two pros and two cons of the trade barriers used? Play devil's advocate and attempt to debunk two peers' opinions on the advantages and disadvantages of an open economy.

Answer 1

In the 1980-89, USA had added to the grain eports to USSR which included corn and wheat.

The United States imposed a wide range of trade restrictions on Japan in the 1980s. For instance, Voluntary Export Restraints on Japanese autos were equivalent to a tariff rate exceeding 60 percent, according to a widely cited analysis. America was able to exert great pressure on Japan at the time because it was both Japan’s major overseas market and its geopolitical defender against the Soviet Union. There was also no World Trade Organization (WTO) to constrain unilateral moves at the time. Bowing to pressure from the United States, Japanese trade negotiators agreed to a whole constellation of agreements designed to limit exports of steel and cars to the U.S., expand imports from the U.S., and eliminate “barriers” to the success of American firms in the Japanese market. There were Voluntary Export Restraints (VERs) on steel and autos, Voluntary Import Expansions like the U.S.-Japan Semiconductor Trade Agreement of 1986, the so-called Market Oriented Sector Specific negotiations that covered five sectors under Reagan, and the Structural Impediments Initiative begun under Reagan’s successor, George H. W. Bush.

Pros:

Helps protect the domestic producers in the country.

Promotes domestic production in the economy.

Cons:

Results in lower foreign in flow

Keeps out the international competition which is required for higher quality performance for the quality od domestic market.