Question

Milton Friedman, a Nobel Prize winner economist and an advocate of free trade answers questions about the effect of free trade on employment in the following 6-minute video. Please watch the following and reflect on the employment argument for protectionism. Should we protect certain industries against foreign competition through tariffs and quotas to protect employment in these areas? This video is from the 1970's but we have the exact same argument in our current political and economic environment. Please comment on the current administration's decision to impose tariffs on steel and aluminum. Who will win, who will lose as a result of these new tariffs?

https://www.youtube.com/watch?v=j0pl_FXt0eM&feature=youtu.be

Answer 1

Milton Friedman was a advocate of the free trade theory, accoriding to him high tarffis in the economy makes the goods more expensive and creates unemployment in the economy. The imposing of high import tariffs and quotas makes the steel more expensive and force the country to produce the steel in home with negative externalities(pollution). If the japanese allowed free trade with it will obviously create unemployment in the economy but it is not the case the americans will pay for the Japan's import by dollars. So japan will going to spend these dollars some where else, this in turn creates more jobs in the economy and going to reduce the unemployment in the country. The dollar spend on the import of steel will find its way back to the U.S directly or indirectly. By the free trade the U.S got the steels more cheaply this will not reduce the overall employment in the economy.