Domestic producers of manufactured goods often base their demand for import protection on the fact that workers in Indonesia, for example, are paid substandard wages (compared to the wages in the United States). Is this a valid argument for import protection?

Question

Krystal Kelly

Business

1 January, 17:24

Domestic producers of manufactured goods often base their demand for import protection on the fact that workers in Indonesia, for example, are paid substandard wages (compared to the wages in the United States). Is this a valid argument for import protection?

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Answers (1)

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Rafael Reynolds · Answer 1

No, it is not a valid argument for import protection

Explanation:

There are several arguments that are waged in favor of protectionism. One of the most common, that is seen in this question, in the unfair competition argument, in which domestic producers argue that producers from abroad pay unfair wages, or engage in dumping, or do not pay enough for raw materials.

The fact is, what is a substandard wage in the United States, is probably an average, or even higher-than-average wage in Indonesia, because wages are determined by the market conditions in each country. Indonesia, as a low-income country, has wages on average well below the average wage in the United States, a high-income country.

Therefore, domestic producers do not have any valid reason to demand import protection because Indonesian producers pay substantially lower wages than them. These are economic realities given by market conditions.