It contends very plausibly that in an uncertain world political-military objectives (self-sufficiency)

must take precedence over economic goals (efficiency in the allocation of world resources).

Unfortunately, there is no objective criterion for weighing the relative worth of the increase in

national security, on the one hand, and the decrease in productive efficiency on the other, which

accompany the reallocation of resources toward strategic industries when such tariffs are imposed.

The economist can only call attention to the fact that certain economic costs are involved when

tariffs are levied to enhance military self-sufficiency.

When achieved through tariffs, self-sufficiency gives rise to costs in the form of higher domestic

prices on the output of the shielded industry.

Secondly, this “save American, Russian, British, French, etc., jobs” argument for tariffs becomes

Increasingly fashionable as an economy encounters a recession. It is rooted in macroanalysis.

Of course, there are important shortcomings associated with this policy. However, while imports

may eliminate some jobs in any country, they may create new jobs. Cheap imports from

Russia may have eliminated the jobs of American steel and textile workers in recent years; but other

workers have gained jobs in manufacturing electronic equipment, means of communication, complex

astronautics and medical technology, and so forth.

Thus, while import restrictions alter the composition of employment, they may actually have

little or no effect on the volume of employment.

Thirdly, nations adversely affected by tariffs and quotas are likely to retaliate, causing a competitive

raising of trade barriers which will choke off the trade and bring losses to all nations.

Fourthly, there is an argument that domestic firms and workers must be shielded from the ruinous

competition of countries where wages are low. If protection is not provided, cheap imports will

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flood domestic markets and the prices of domestic goods — along with the wages of workers — will

be pulled down and the domestic living standards reduced. However, that is not the case. A lowincome

farm worker may pick lettuce or tomatoes for a rich landowner and both may benefit from

the transaction. And don’t Russia consumers gain when they buy a Taiwanese vest pocket radio

priced at $12 as opposed to a qualitatively similar Russian-made radio selling for $20?

In the long-run a nation must import in order to export. Hence, the long-run impact of tariffs

Is not to increase domestic employment but at best to reallocate workers away from export industries

and toward protected domestic industries. This shift implies a less efficient allocation of resources.

Tariffs divert resources away from those industries in which production is so efficient as to

provide a comparative advantage. There is little doubt that intelligent, well-timed monetary and

fiscal policies are preferable to tariff and quota adjustments as anticyclical techniques.

d) Some considerations about the expediency of protectionism

The infant-industry argument contends that protective tariffs are needed for the purpose of allowing

new domestic industries to establish themselves. Temporarily shielding young domestic firms

from the severe competition afforded by more mature and therefore currently more efficient foreign

firms will give the infant industries a chance to develop and become efficient producers. Though the