Note: Please mention the chapter before your response/comments. Question: If t

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Question: If the United States is a net importer of a product that is being subsidized or dumped by Japan, not only do U.S. consumers gain, but they also gain more than U.S. producers lose from the Japanese subsidies or dumping. Explain why this is or is not true.
Discuss the concept(s) relating to the above question. In your analyses, use some of the terms and theories in the e-Text to support your argument(s).
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U.S. Tariff Policies Before 1930
As Table 6.1 makes clear, U.S. tariff history has been marked by fluctuations. The dominant motive behind the early tariff laws of the United States was to provide the government with an important source of tax revenue. This revenue objective was the main reason Congress passed the first tariff law in 1789. This law allowed only the federal government to levy uni-form tariffs, ranging from 5 to 15 percent, so the former system of separate state tariff rates disappeared. Tariffs were the largest source of federal revenue during this era, accounting for over 90 percent of federal revenue during the 1790s. Tariffs were the biggest funding source of the U.S. government from its founding until the advent of the federal income tax in 1913. As the economy diversified and developed alternative sources of tax revenue, such as the income tax and payroll tax, justification for the revenue motive was weakened. The tariffs collected by the federal government today are only about 1 percent of total federal revenues, a negligible amount. As the revenue argument weakened, the protective argument for tariffs developed
strength. In 1791, Alexander Hamilton presented to Congress his famous “Report on Manu-facturers” that proposed the young industries of the United States be granted import protec-tion until they could grow and prosper—the infant
industry argument. Although
Hamilton’s writings did not initially have a legislative impact, by the 1820s, protectionist sentiments in the United States were well established, especially in the Northern states where manufacturing industries were being developed. However, intense political opposition.
Smoot–hawley act
The crash of the U.S. stock market in 1929 and the fall of the American economy into the Great Depression resulted in the country’s unemployment steadily climbing upward and ultimately peaking at 25 percent in 1933. Although the U.S. government could have responded with fiscal stimulus, such as government spending projects, or the Federal Reserve could have cut interest rates in order to increase domestic spending, neither of these policies were implemented. Instead, the U.S. government implemented tariffs to reduce America’s imports and thus protect its firms and workers. This policy pushed costs onto America’s trade partners, by decreasing their sales and the price they receive for goods that they exported to the United States. The high point of U.S. protectionism occurred with the passage of the Smoot–Hawley
Act in 1930, under which U.S. average tariffs were raised to 53 percent on protected imports. As the Smoot–Hawley bill moved through the U.S. Congress, formal protests from foreign nations flooded Washington, eventually adding up to a document of 200 pages. Neverthe-less, both the House of Representatives and the Senate approved the bill. Although about a thousand U.S. economists beseeched President Herbert Hoover to veto the legislation, he did not do so, and the tariff was signed into law on June 17, 1930. Simply put, the Smoot–Hawley Act tried to divert national demand away from imports and toward domestically produced goods. The legislation provoked retaliation by 25 trading partners of the United States. Spain imple-mented the Wais Tariff in reaction to U.S. tariffs on cork, oranges, and grapes. Switzerland boycotted U.S. exports to protest new tariffs on watches and shoes. Canada increased its tariffs threefold in reaction to U.S. tariffs on timber, logs, and many food products. Italy retaliated against tariffs on olive oil and hats with tariffs on U.S. automobiles. Mexico, Cuba, Australia, and New Zealand also participated in the tariff wars. Other beggar-thy-neighbor policies, such as foreign-exchange controls and currency depreciations, were also implemented. The effort by several nations to run a trade surplus by reducing imports led to a breakdown of the interna-tional trading system. Within two years after the Smoot–Hawley Act, U.S. exports decreased by nearly two-thirds. Figure 6.1 shows the decline of world trade as the global economy fell into the Great Depression. How did President Hoover fall into such a protectionist trap? The president felt com-pelled to honor the 1928 Republican platform calling for tariffs to aid the weakened farm economy. The stock market crash of 1929 and the imminent Great Depression further led to a crisis atmosphere. Republicans had been sympathetic to protectionism for decades. Now they viewed import tariffs as a method of fulfilling demands that government should initiate positive steps to combat domestic unemployment.

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