[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:01.22,0:00:03.16,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:09.42,0:00:12.86,Default,,0000,0000,0000,,- [Alex] In our previous videos, \Nwe explained the benefits of trade.
Dialogue: 0,0:00:12.86,0:00:15.78,Default,,0000,0000,0000,,Today we're going to evaluate \Nsome of the arguments
Dialogue: 0,0:00:15.78,0:00:19.44,Default,,0000,0000,0000,,that one often hears \Nabout limiting international trade.
Dialogue: 0,0:00:24.98,0:00:27.65,Default,,0000,0000,0000,,International trade is \Na controversial subject.
Dialogue: 0,0:00:27.65,0:00:29.55,Default,,0000,0000,0000,,There's a lot of arguments\Nsurrounding it.
Dialogue: 0,0:00:29.55,0:00:31.75,Default,,0000,0000,0000,,We're not going to go through all \Nof them by any means.
Dialogue: 0,0:00:31.75,0:00:33.42,Default,,0000,0000,0000,,But here are some \Nof the most common:
Dialogue: 0,0:00:33.42,0:00:37.55,Default,,0000,0000,0000,,That trade reduces the number \Nof jobs in the United States.
Dialogue: 0,0:00:37.55,0:00:41.18,Default,,0000,0000,0000,,That it's wrong to trade \Nwith countries that use child labor.
Dialogue: 0,0:00:41.18,0:00:45.60,Default,,0000,0000,0000,,That we need to keep certain jobs \Nat home for national security.
Dialogue: 0,0:00:45.60,0:00:48.40,Default,,0000,0000,0000,,We need to keep certain \Nkey industries at home
Dialogue: 0,0:00:48.40,0:00:52.86,Default,,0000,0000,0000,,because of beneficial spillovers \Nonto other sectors of the economy.
Dialogue: 0,0:00:52.86,0:00:56.26,Default,,0000,0000,0000,,And we can increase \NU.S. well-being, the argument goes,
Dialogue: 0,0:00:56.26,0:00:58.97,Default,,0000,0000,0000,,with strategic trade protectionism.
Dialogue: 0,0:00:58.97,0:01:00.47,Default,,0000,0000,0000,,So we're going to evaluate, say,
Dialogue: 0,0:01:00.47,0:01:02.53,Default,,0000,0000,0000,,a few things about each one \Nof these arguments.
Dialogue: 0,0:01:02.75,0:01:04.85,Default,,0000,0000,0000,,Let's consider trade and jobs.
Dialogue: 0,0:01:05.36,0:01:07.68,Default,,0000,0000,0000,,What happens when \Na tariff is lowered?
Dialogue: 0,0:01:07.68,0:01:11.49,Default,,0000,0000,0000,,Well, imports will increase, \Nand there will be fewer jobs
Dialogue: 0,0:01:11.49,0:01:13.82,Default,,0000,0000,0000,,in the import competing industry.
Dialogue: 0,0:01:13.82,0:01:17.33,Default,,0000,0000,0000,,For example, if we have a tariff\Non shoes and we reduce the tariff,
Dialogue: 0,0:01:17.33,0:01:20.89,Default,,0000,0000,0000,,we'll have imports of more shoes \Nfrom China and from Vietnam,
Dialogue: 0,0:01:20.89,0:01:22.74,Default,,0000,0000,0000,,and that will mean fewer jobs
Dialogue: 0,0:01:22.74,0:01:25.96,Default,,0000,0000,0000,,in the American \Nshoe-producing industry.
Dialogue: 0,0:01:26.33,0:01:30.52,Default,,0000,0000,0000,,That's what people see when \Nthey think about reducing a tariff.
Dialogue: 0,0:01:30.52,0:01:34.37,Default,,0000,0000,0000,,They're worried about losing those \Njobs in the American industry.
Dialogue: 0,0:01:34.37,0:01:38.77,Default,,0000,0000,0000,,However, we want to see \Nthe issue in a deeper way,
Dialogue: 0,0:01:38.77,0:01:44.64,Default,,0000,0000,0000,,in a more fundamental way,\Nand a key question to ask is,
Dialogue: 0,0:01:44.64,0:01:49.78,Default,,0000,0000,0000,,"Why do people send us goods? \NWhy would workers in China
Dialogue: 0,0:01:49.78,0:01:53.80,Default,,0000,0000,0000,,and Vietnam work long hours \Nto send us shoes?"
Dialogue: 0,0:01:54.14,0:01:56.92,Default,,0000,0000,0000,,It's certainly not from \Nthe kindness of their heart.
Dialogue: 0,0:01:56.92,0:02:03.13,Default,,0000,0000,0000,,Ultimately, they want goods \Nin return, goods or services.
Dialogue: 0,0:02:03.52,0:02:08.11,Default,,0000,0000,0000,,They are working -- they are \Nproducing in order to consume.
Dialogue: 0,0:02:08.11,0:02:12.10,Default,,0000,0000,0000,,They are sending us goods \Nbecause they want goods in return.
Dialogue: 0,0:02:12.10,0:02:15.46,Default,,0000,0000,0000,,They are not doing it out \Nof the goodness of their hearts,
Dialogue: 0,0:02:15.47,0:02:19.03,Default,,0000,0000,0000,,but out of self-interest\Nas Adam Smith said.
Dialogue: 0,0:02:19.91,0:02:25.49,Default,,0000,0000,0000,,And that leads to a fundamental \Ninsight about international trade.
Dialogue: 0,0:02:25.79,0:02:30.80,Default,,0000,0000,0000,,Namely, we pay \Nfor our imports with exports.
Dialogue: 0,0:02:31.18,0:02:37.64,Default,,0000,0000,0000,,When we import more, \Nwe will ultimately export more
Dialogue: 0,0:02:37.64,0:02:43.16,Default,,0000,0000,0000,,because we pay for our imports \Nthrough our exports.
Dialogue: 0,0:02:43.67,0:02:50.05,Default,,0000,0000,0000,,What this means is that trade \Ndoesn't destroy jobs overall.
Dialogue: 0,0:02:50.42,0:02:54.71,Default,,0000,0000,0000,,Trade moves jobs \Nfrom import-competing industries
Dialogue: 0,0:02:54.71,0:03:00.100,Default,,0000,0000,0000,,to export industries, and overall, \Nwages increase on average
Dialogue: 0,0:03:00.100,0:03:03.25,Default,,0000,0000,0000,,because of comparative advantage.
Dialogue: 0,0:03:03.36,0:03:07.16,Default,,0000,0000,0000,,Because we pay \Nfor our imports with exports,
Dialogue: 0,0:03:07.16,0:03:10.16,Default,,0000,0000,0000,,when we import more, \Nwe will export more.
Dialogue: 0,0:03:10.53,0:03:15.65,Default,,0000,0000,0000,,Jobs will reduce in the import\Ncompeting industries and increase
Dialogue: 0,0:03:15.70,0:03:17.23,Default,,0000,0000,0000,,in the export industries.
Dialogue: 0,0:03:17.54,0:03:20.70,Default,,0000,0000,0000,,Now, this process is \Nnot always easy.
Dialogue: 0,0:03:20.70,0:03:25.11,Default,,0000,0000,0000,,Problems can occur when we lose\Njobs in low-skill import-competing
Dialogue: 0,0:03:25.11,0:03:28.76,Default,,0000,0000,0000,,sectors and gain jobs \Nin high-skill export sectors.
Dialogue: 0,0:03:28.76,0:03:32.63,Default,,0000,0000,0000,,Overall, when the United States \Nimports goods, we typically
Dialogue: 0,0:03:32.63,0:03:37.33,Default,,0000,0000,0000,,import goods produced by low-skill,\Nbecause America on average
Dialogue: 0,0:03:37.33,0:03:40.37,Default,,0000,0000,0000,,is a high-skill economy, \Nhas high-skilled workers
Dialogue: 0,0:03:40.37,0:03:44.34,Default,,0000,0000,0000,,on a world level, but we do have\Nsome low-skill workers,
Dialogue: 0,0:03:44.34,0:03:47.50,Default,,0000,0000,0000,,and imports tend to compete \Nwith the products
Dialogue: 0,0:03:47.50,0:03:49.69,Default,,0000,0000,0000,,produced by low-skilled workers.
Dialogue: 0,0:03:49.69,0:03:53.76,Default,,0000,0000,0000,,Everything will be fine \Nif our education system is
Dialogue: 0,0:03:53.76,0:03:57.22,Default,,0000,0000,0000,,working well, and if those \Nlow-skill workers can increase
Dialogue: 0,0:03:57.22,0:03:59.03,Default,,0000,0000,0000,,their skills and move \Nto high-tech --
Dialogue: 0,0:03:59.03,0:04:03.48,Default,,0000,0000,0000,,or high-skill, not necessarily \Nhigh-tech -- high-skill sectors.
Dialogue: 0,0:04:03.69,0:04:08.82,Default,,0000,0000,0000,,Of course, that's a big "if," \Nand the transition can be difficult.
Dialogue: 0,0:04:08.82,0:04:12.01,Default,,0000,0000,0000,,We have to put this \Nin context, however.
Dialogue: 0,0:04:12.11,0:04:16.76,Default,,0000,0000,0000,,In a growing economy, jobs are \Nappearing and disappearing
Dialogue: 0,0:04:16.76,0:04:19.99,Default,,0000,0000,0000,,all the time, not just \Nor even fundamentally because
Dialogue: 0,0:04:19.99,0:04:22.31,Default,,0000,0000,0000,,of international trade, \Nbut because of changes
Dialogue: 0,0:04:22.31,0:04:24.43,Default,,0000,0000,0000,,in preferences \Nand changes in technology.
Dialogue: 0,0:04:24.57,0:04:26.25,Default,,0000,0000,0000,,Let's take a look at that.
Dialogue: 0,0:04:27.27,0:04:28.68,Default,,0000,0000,0000,,It's important when thinking
Dialogue: 0,0:04:28.68,0:04:30.73,Default,,0000,0000,0000,,about trade and jobs \Nand jobs in general
Dialogue: 0,0:04:30.74,0:04:36.94,Default,,0000,0000,0000,,that the American economy succeeds \Nprecisely because jobs are being
Dialogue: 0,0:04:36.94,0:04:39.100,Default,,0000,0000,0000,,created and destroyed \Nall the time.
Dialogue: 0,0:04:40.58,0:04:45.51,Default,,0000,0000,0000,,Job destruction is often a sign \Nof progress and growth.
Dialogue: 0,0:04:46.02,0:04:47.72,Default,,0000,0000,0000,,Think about Thomas Edison.
Dialogue: 0,0:04:47.72,0:04:51.96,Default,,0000,0000,0000,,He destroyed the whaling industry \Nwith his invention of the light bulb.
Dialogue: 0,0:04:52.53,0:04:56.39,Default,,0000,0000,0000,,CDs -- some of you may not even \Nremember compact discs --
Dialogue: 0,0:04:56.39,0:04:59.59,Default,,0000,0000,0000,,they destroyed jobs \Nin the record industry.
Dialogue: 0,0:04:59.89,0:05:03.71,Default,,0000,0000,0000,,MP3s destroyed jobs \Nin the CD industry.
Dialogue: 0,0:05:03.71,0:05:07.31,Default,,0000,0000,0000,,This is the way progress \Noften occurs.
Dialogue: 0,0:05:07.31,0:05:10.57,Default,,0000,0000,0000,,Employment and the standard \Nof living overall keep rising
Dialogue: 0,0:05:10.57,0:05:15.78,Default,,0000,0000,0000,,over time, and the reason they're \Nrising is precisely that old jobs
Dialogue: 0,0:05:15.78,0:05:18.77,Default,,0000,0000,0000,,are being destroyed, \Nnew jobs are being created.
Dialogue: 0,0:05:19.16,0:05:25.53,Default,,0000,0000,0000,,Overall, in the churn,\Nthere's a trend towards richer jobs,
Dialogue: 0,0:05:25.59,0:05:28.07,Default,,0000,0000,0000,,higher-paying jobs, higher wages.
Dialogue: 0,0:05:28.07,0:05:32.91,Default,,0000,0000,0000,,Overall technology, trade, \Nthese benefit the U.S. economy.
Dialogue: 0,0:05:34.52,0:05:36.72,Default,,0000,0000,0000,,Child labor is something \Nwhich no one wants,
Dialogue: 0,0:05:36.81,0:05:40.00,Default,,0000,0000,0000,,but it's important to understand\Nthat child labor is something
Dialogue: 0,0:05:40.00,0:05:42.33,Default,,0000,0000,0000,,which happens when people are poor.
Dialogue: 0,0:05:42.68,0:05:45.98,Default,,0000,0000,0000,,Child labor was common \Nin 19th century Great Britain
Dialogue: 0,0:05:45.98,0:05:47.41,Default,,0000,0000,0000,,and the United States.
Dialogue: 0,0:05:47.49,0:05:50.26,Default,,0000,0000,0000,,Child labor declined \Nin the developed world
Dialogue: 0,0:05:50.26,0:05:52.50,Default,,0000,0000,0000,,as people got richer.
Dialogue: 0,0:05:52.50,0:05:56.59,Default,,0000,0000,0000,,Forces that reduced child labor \Nin the developed world are also
Dialogue: 0,0:05:56.59,0:05:58.70,Default,,0000,0000,0000,,at work in the developing countries.
Dialogue: 0,0:05:58.70,0:06:02.06,Default,,0000,0000,0000,,As countries become richer, \Nchild labor declines.
Dialogue: 0,0:06:02.39,0:06:07.32,Default,,0000,0000,0000,,What this graph shows is that \Nas real GDP per capita increases,
Dialogue: 0,0:06:07.32,0:06:11.91,Default,,0000,0000,0000,,the percent of children ages 10 \Nto 14 in the labor force decreases.
Dialogue: 0,0:06:12.21,0:06:15.46,Default,,0000,0000,0000,,So increases in real GDP reduce
Dialogue: 0,0:06:15.46,0:06:18.06,Default,,0000,0000,0000,,the percent of children \Nin the labor force.
Dialogue: 0,0:06:18.44,0:06:22.64,Default,,0000,0000,0000,,The circles, by the way, are \Nproportional to the absolute number
Dialogue: 0,0:06:22.64,0:06:26.03,Default,,0000,0000,0000,,of children in the labor force, \Nso in China, for example,
Dialogue: 0,0:06:26.03,0:06:29.23,Default,,0000,0000,0000,,there are about 12 percent \Nof kids in the labor force,
Dialogue: 0,0:06:29.23,0:06:31.97,Default,,0000,0000,0000,,but because there are so many \NChinese children, that's
Dialogue: 0,0:06:31.97,0:06:35.66,Default,,0000,0000,0000,,a large number of children \Nin absolute numbers.
Dialogue: 0,0:06:35.78,0:06:38.09,Default,,0000,0000,0000,,Again the key here is really
Dialogue: 0,0:06:38.09,0:06:40.98,Default,,0000,0000,0000,,that economic growth \Nreduces child labor.
Dialogue: 0,0:06:41.68,0:06:46.68,Default,,0000,0000,0000,,So if you want to reduce child labor \Nyou want a country to become rich.
Dialogue: 0,0:06:46.78,0:06:52.47,Default,,0000,0000,0000,,The question is, "Can one \Naccelerate this process by banning
Dialogue: 0,0:06:52.47,0:06:59.05,Default,,0000,0000,0000,,child labor or by refusing to trade \Nwith countries that use child labor?"
Dialogue: 0,0:06:59.32,0:07:03.23,Default,,0000,0000,0000,,That's really refusing to trade \Nwith the poorest of countries.
Dialogue: 0,0:07:03.23,0:07:05.47,Default,,0000,0000,0000,,Do we really want to do that?
Dialogue: 0,0:07:05.47,0:07:07.32,Default,,0000,0000,0000,,Do we really want \Nto say to poor countries,
Dialogue: 0,0:07:07.34,0:07:09.20,Default,,0000,0000,0000,,"We're not going to trade with you."
Dialogue: 0,0:07:09.20,0:07:12.99,Default,,0000,0000,0000,,There are many opportunities \Nhere for unintended consequences
Dialogue: 0,0:07:12.99,0:07:18.04,Default,,0000,0000,0000,,of laws which may have been trying \Nto do a good thing but backfire.
Dialogue: 0,0:07:18.10,0:07:22.37,Default,,0000,0000,0000,,So, for example, when India\Nbanned child labor,
Dialogue: 0,0:07:22.37,0:07:27.10,Default,,0000,0000,0000,,one of the effects of that was \Nto reduce the wages of children
Dialogue: 0,0:07:27.10,0:07:29.44,Default,,0000,0000,0000,,because now you have \Nto hire them under the table.
Dialogue: 0,0:07:29.44,0:07:32.61,Default,,0000,0000,0000,,Because their wages were lower,\Nthe families were poorer,
Dialogue: 0,0:07:32.61,0:07:34.72,Default,,0000,0000,0000,,and because the families \Nwere poorer,
Dialogue: 0,0:07:34.72,0:07:38.42,Default,,0000,0000,0000,,they had to rely \Neven more on child labor.
Dialogue: 0,0:07:38.42,0:07:43.99,Default,,0000,0000,0000,,So it is very easy to create \Na policy which backfires.
Dialogue: 0,0:07:44.61,0:07:51.59,Default,,0000,0000,0000,,It is not, in my view, a good idea \Nto use international trade
Dialogue: 0,0:07:51.59,0:07:57.47,Default,,0000,0000,0000,,as a weapon or as a tool \Nagainst child labor.
Dialogue: 0,0:07:57.47,0:08:01.00,Default,,0000,0000,0000,,A much better idea would be \Nto help poor countries,
Dialogue: 0,0:08:01.00,0:08:04.81,Default,,0000,0000,0000,,would be to offer free schooling \Nin poor countries,
Dialogue: 0,0:08:04.81,0:08:09.17,Default,,0000,0000,0000,,to offer lunches for schools \Nin poor countries.
Dialogue: 0,0:08:09.41,0:08:12.74,Default,,0000,0000,0000,,This increases the incentive \Nto send the children to school
Dialogue: 0,0:08:12.74,0:08:14.32,Default,,0000,0000,0000,,because then they are fed.
Dialogue: 0,0:08:14.64,0:08:18.21,Default,,0000,0000,0000,,So there are lots of things we can \Ndo to reduce child labor
Dialogue: 0,0:08:18.21,0:08:21.11,Default,,0000,0000,0000,,in poorer countries,\Nbut to say to those countries,
Dialogue: 0,0:08:21.11,0:08:24.67,Default,,0000,0000,0000,,"We're not going to trade with you\Nbecause you're poor
Dialogue: 0,0:08:24.67,0:08:27.62,Default,,0000,0000,0000,,and you're using child labor\Njust exactly the same way
Dialogue: 0,0:08:27.62,0:08:30.45,Default,,0000,0000,0000,,we did in the 19th century."
Dialogue: 0,0:08:30.81,0:08:34.63,Default,,0000,0000,0000,,That is really not in my view\Na productive policy.
Dialogue: 0,0:08:35.81,0:08:39.16,Default,,0000,0000,0000,,Trade and national security.\NYeah, some industries probably
Dialogue: 0,0:08:39.18,0:08:42.04,Default,,0000,0000,0000,,should be protected \Nto protect national security.
Dialogue: 0,0:08:42.04,0:08:44.95,Default,,0000,0000,0000,,The problem is this argument \Nis subject to great abuse.
Dialogue: 0,0:08:44.95,0:08:47.64,Default,,0000,0000,0000,,Almost every industry can \Nand does make the claim
Dialogue: 0,0:08:47.64,0:08:50.59,Default,,0000,0000,0000,,that they're essential \Nfor national security.
Dialogue: 0,0:08:50.59,0:08:53.50,Default,,0000,0000,0000,,So let's give some examples. \NVaccine production?
Dialogue: 0,0:08:53.50,0:08:58.09,Default,,0000,0000,0000,,Yes, probably a good idea for us \Nto have some domestic capability.
Dialogue: 0,0:08:58.09,0:09:01.79,Default,,0000,0000,0000,,We don't always want to buy our \Nvaccines from abroad, just in case.
Dialogue: 0,0:09:02.20,0:09:04.92,Default,,0000,0000,0000,,Angora goat fleece? Am I serious?
Dialogue: 0,0:09:04.92,0:09:09.94,Default,,0000,0000,0000,,Yes. Believe it or not, \Nwe have protected Angora goats
Dialogue: 0,0:09:09.94,0:09:13.27,Default,,0000,0000,0000,,with the argument \Nthat their fleece is necessary
Dialogue: 0,0:09:13.27,0:09:15.69,Default,,0000,0000,0000,,to produce military uniforms.
Dialogue: 0,0:09:15.69,0:09:19.35,Default,,0000,0000,0000,,Yep, some people think goats \Nare vital to national security.
Dialogue: 0,0:09:19.35,0:09:21.15,Default,,0000,0000,0000,,I'm not kidding.
Dialogue: 0,0:09:21.61,0:09:25.50,Default,,0000,0000,0000,,The key industries argument is very\Npopular among the high-tech crowd.
Dialogue: 0,0:09:25.64,0:09:29.57,Default,,0000,0000,0000,,The argument is, is that there are \Nsome industries, which for a variety
Dialogue: 0,0:09:29.57,0:09:33.73,Default,,0000,0000,0000,,of reasons, are especially important \Nfor a nation to have a foothold in.
Dialogue: 0,0:09:33.90,0:09:36.90,Default,,0000,0000,0000,,"Biology, microbiology is going \Nto be the future,
Dialogue: 0,0:09:36.90,0:09:39.64,Default,,0000,0000,0000,,therefore we need \Nto have this type of industry."
Dialogue: 0,0:09:39.64,0:09:41.58,Default,,0000,0000,0000,,Or, "Computers are the future,
Dialogue: 0,0:09:41.58,0:09:43.64,Default,,0000,0000,0000,,therefore we need to have \Nthis type of industry."
Dialogue: 0,0:09:43.64,0:09:46.43,Default,,0000,0000,0000,,The argument is that \Nthese industries create spillovers
Dialogue: 0,0:09:46.43,0:09:48.08,Default,,0000,0000,0000,,for other industries.
Dialogue: 0,0:09:48.08,0:09:52.70,Default,,0000,0000,0000,,They create learning, they create \Nresearch, they create workers,
Dialogue: 0,0:09:52.70,0:09:56.76,Default,,0000,0000,0000,,high-tech workers, which spread out \Nto other areas of the economy
Dialogue: 0,0:09:56.76,0:10:02.56,Default,,0000,0000,0000,,and benefit the economy in ways\Nwhich go beyond the GDP
Dialogue: 0,0:10:02.56,0:10:04.62,Default,,0000,0000,0000,,produced by those\Nparticular industries.
Dialogue: 0,0:10:05.01,0:10:07.38,Default,,0000,0000,0000,,Ross Perot famously made \Nthis argument when he said,
Dialogue: 0,0:10:07.38,0:10:10.91,Default,,0000,0000,0000,,"Producing computer chips is\Nbetter than potato chips."
Dialogue: 0,0:10:10.91,0:10:13.46,Default,,0000,0000,0000,,In some ways this may be true,
Dialogue: 0,0:10:13.46,0:10:16.23,Default,,0000,0000,0000,,but it's overall not \Na compelling argument.
Dialogue: 0,0:10:16.23,0:10:18.64,Default,,0000,0000,0000,,For example, today \Nmost computer chips are
Dialogue: 0,0:10:18.64,0:10:20.31,Default,,0000,0000,0000,,cheap, mass-produced products.
Dialogue: 0,0:10:20.31,0:10:23.43,Default,,0000,0000,0000,,They're not something we really \Nwant to be producing at all.
Dialogue: 0,0:10:23.43,0:10:25.48,Default,,0000,0000,0000,,They're not even produced \Nwith a lot of labor.
Dialogue: 0,0:10:25.48,0:10:29.08,Default,,0000,0000,0000,,They're mostly produced \Nin big factories which don't
Dialogue: 0,0:10:29.08,0:10:30.55,Default,,0000,0000,0000,,actually make lot of money.
Dialogue: 0,0:10:30.55,0:10:33.75,Default,,0000,0000,0000,,Much better to design the product\Nthe way Apple does,
Dialogue: 0,0:10:33.75,0:10:38.03,Default,,0000,0000,0000,,making lots of profit, \Nthan to buy the chips which Apple
Dialogue: 0,0:10:38.03,0:10:41.80,Default,,0000,0000,0000,,uses in its iPhones, which don't \Nmake a lot of money at all.
Dialogue: 0,0:10:41.80,0:10:46.88,Default,,0000,0000,0000,,In 1990, Walmart contributed \Nmore to the boom in productivity
Dialogue: 0,0:10:46.88,0:10:48.37,Default,,0000,0000,0000,,than Silicon Valley.
Dialogue: 0,0:10:48.37,0:10:52.41,Default,,0000,0000,0000,,So it's always difficult \Nto say exactly which are
Dialogue: 0,0:10:52.41,0:10:54.68,Default,,0000,0000,0000,,the most important industries.
Dialogue: 0,0:10:54.68,0:10:57.14,Default,,0000,0000,0000,,You wouldn't think \Nthat Walmart retail is
Dialogue: 0,0:10:57.14,0:11:01.20,Default,,0000,0000,0000,,a hugely important industry,\Nand yet, Walmart is
Dialogue: 0,0:11:01.20,0:11:04.64,Default,,0000,0000,0000,,the world's largest firm,\Nand it has done a huge amount
Dialogue: 0,0:11:04.64,0:11:08.37,Default,,0000,0000,0000,,to make the American economy \Nmore productive.
Dialogue: 0,0:11:08.63,0:11:11.30,Default,,0000,0000,0000,,So no one really knows \Nwhich industries are the ones
Dialogue: 0,0:11:11.30,0:11:14.15,Default,,0000,0000,0000,,with the really important \Nspillovers, and when we add
Dialogue: 0,0:11:14.15,0:11:18.70,Default,,0000,0000,0000,,in political economy, the tendency \Nfor politics to often choose
Dialogue: 0,0:11:18.70,0:11:20.78,Default,,0000,0000,0000,,based upon the wrong reasons --
Dialogue: 0,0:11:20.78,0:11:23.16,Default,,0000,0000,0000,,this argument is really \Nnot very compelling.
Dialogue: 0,0:11:24.03,0:11:25.95,Default,,0000,0000,0000,,Here's an argument \Nwhich again works in theory,
Dialogue: 0,0:11:25.98,0:11:27.95,Default,,0000,0000,0000,,but is less likely \Nto work in practice.
Dialogue: 0,0:11:27.95,0:11:31.47,Default,,0000,0000,0000,,It's possible for a country \Nto use tariffs and quotas
Dialogue: 0,0:11:31.47,0:11:35.29,Default,,0000,0000,0000,,to get a larger share \Nof the gains from trade.
Dialogue: 0,0:11:35.29,0:11:40.01,Default,,0000,0000,0000,,The argument here is that \Nif you can limit or tax exports,
Dialogue: 0,0:11:40.12,0:11:43.54,Default,,0000,0000,0000,,not tax imports, but tax exports,
Dialogue: 0,0:11:43.54,0:11:48.45,Default,,0000,0000,0000,,then you can let domestic firms\Nact as a cartel,
Dialogue: 0,0:11:48.45,0:11:52.08,Default,,0000,0000,0000,,so it's a way of helping \Ndomestic firms to be more
Dialogue: 0,0:11:52.08,0:11:54.47,Default,,0000,0000,0000,,like a monopoly, \Nto act like a cartel.
Dialogue: 0,0:11:54.77,0:11:57.50,Default,,0000,0000,0000,,So the government \Nplus the domestic firms put --
Dialogue: 0,0:11:57.50,0:12:02.90,Default,,0000,0000,0000,,creates a tax, or limits exports, \Nin order to raise the price
Dialogue: 0,0:12:02.90,0:12:07.23,Default,,0000,0000,0000,,of those exports on world markets \Nand in order to grab up
Dialogue: 0,0:12:07.23,0:12:09.08,Default,,0000,0000,0000,,more of the gains from trade.
Dialogue: 0,0:12:09.33,0:12:11.100,Default,,0000,0000,0000,,It can work, especially \Nif there are few substitutes
Dialogue: 0,0:12:11.100,0:12:13.84,Default,,0000,0000,0000,,for U.S.-produced goods.
Dialogue: 0,0:12:13.84,0:12:16.97,Default,,0000,0000,0000,,On the other hand, if there are \Nsubstitutes for U.S.-produced goods,
Dialogue: 0,0:12:16.97,0:12:19.52,Default,,0000,0000,0000,,or if we push the price\Nof our goods up too high,
Dialogue: 0,0:12:19.52,0:12:22.80,Default,,0000,0000,0000,,and that creates the substitutes, \Nwe may in the long run
Dialogue: 0,0:12:22.80,0:12:25.12,Default,,0000,0000,0000,,really reduce our market.
Dialogue: 0,0:12:25.50,0:12:30.51,Default,,0000,0000,0000,,Moreover, these arguments \Nfor strategic trade protectionism
Dialogue: 0,0:12:30.51,0:12:35.24,Default,,0000,0000,0000,,are not such a great idea \Nif other countries can retaliate.
Dialogue: 0,0:12:35.24,0:12:40.38,Default,,0000,0000,0000,,If every country tries to do this, \Nthen world trade as a whole will
Dialogue: 0,0:12:40.38,0:12:42.83,Default,,0000,0000,0000,,shrink and no country \Nwill be better off.
Dialogue: 0,0:12:42.83,0:12:46.68,Default,,0000,0000,0000,,So in trying to grab up \Na larger slice of the pie,
Dialogue: 0,0:12:46.68,0:12:50.37,Default,,0000,0000,0000,,we have to always be worried\Nabout making the pie smaller.
Dialogue: 0,0:12:50.71,0:12:53.14,Default,,0000,0000,0000,,Again, the argument works in theory.
Dialogue: 0,0:12:53.14,0:12:57.50,Default,,0000,0000,0000,,A very clever government might \Nbe able to do it, but in practice,
Dialogue: 0,0:12:57.50,0:13:00.50,Default,,0000,0000,0000,,this is really not a very good \Nreason for limiting trade.\N
Dialogue: 0,0:13:00.96,0:13:04.65,Default,,0000,0000,0000,,So to sum up, restrictions \Non trade waste resources
Dialogue: 0,0:13:04.65,0:13:07.91,Default,,0000,0000,0000,,by transferring production \Nfrom low-cost foreign producers
Dialogue: 0,0:13:07.91,0:13:10.74,Default,,0000,0000,0000,,to high-cost domestic producers.
Dialogue: 0,0:13:10.84,0:13:14.26,Default,,0000,0000,0000,,Restrictions on trade\Nalso prevent domestic consumers
Dialogue: 0,0:13:14.26,0:13:16.56,Default,,0000,0000,0000,,from exploiting all \Nof the gains from trade.
Dialogue: 0,0:13:16.80,0:13:19.75,Default,,0000,0000,0000,,There are some good arguments \Nfor restricting trade.
Dialogue: 0,0:13:19.75,0:13:22.10,Default,,0000,0000,0000,,Some arguments are\Nvalid, but they're usually
Dialogue: 0,0:13:22.10,0:13:24.24,Default,,0000,0000,0000,,of limited applicability.
Dialogue: 0,0:13:24.24,0:13:29.82,Default,,0000,0000,0000,,Overall, I think free trade is \Na robust policy in the sense
Dialogue: 0,0:13:29.82,0:13:34.55,Default,,0000,0000,0000,,of it's a policy which works \Nwell in most circumstances,
Dialogue: 0,0:13:34.55,0:13:37.42,Default,,0000,0000,0000,,and protectionism will work well
Dialogue: 0,0:13:37.42,0:13:40.16,Default,,0000,0000,0000,,only in a limited number \Nof circumstances.
Dialogue: 0,0:13:40.42,0:13:41.83,Default,,0000,0000,0000,,Thanks!
Dialogue: 0,0:13:42.54,0:13:45.96,Default,,0000,0000,0000,,- [Narrator] If you want to test \Nyourself, click "Practice Questions."
Dialogue: 0,0:13:45.96,0:13:50.28,Default,,0000,0000,0000,,Or, if you're ready move on, \Njust click "Next Video."
Dialogue: 0,0:13:50.28,0:13:52.97,Default,,0000,0000,0000,,♪ [music] ♪