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Are Attempts To Protect U.S. Firms From Foreign Competition, Such As The Buy American Provision, Good Ideas? Explain

1) The Buy American provision was not a good idea as it led to more job losses than jobs protected. By protecting inefficient domestic manufacturers, it raised prices and reduced sales and production, costing more jobs. Other countries could retaliate as well. 2) Some American companies may oppose it as the higher prices lowers consumer purchasing power and demand for other products, reducing production and jobs. It could also shrink the foreign market if other countries impose similar policies. 3) The Buy American provision would likely not create jobs as the higher prices leave less consumer spending, reducing production and jobs in other industries. If trading partners retaliate, it could reduce exports and cost more jobs.

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36 views2 pages

Are Attempts To Protect U.S. Firms From Foreign Competition, Such As The Buy American Provision, Good Ideas? Explain

1) The Buy American provision was not a good idea as it led to more job losses than jobs protected. By protecting inefficient domestic manufacturers, it raised prices and reduced sales and production, costing more jobs. Other countries could retaliate as well. 2) Some American companies may oppose it as the higher prices lowers consumer purchasing power and demand for other products, reducing production and jobs. It could also shrink the foreign market if other countries impose similar policies. 3) The Buy American provision would likely not create jobs as the higher prices leave less consumer spending, reducing production and jobs in other industries. If trading partners retaliate, it could reduce exports and cost more jobs.

Uploaded by

klm klm
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Aljabery 1

Amira Aljabery

Steven Manley

ECON-2302-83454

5/1/2018

Essay Option 3: The American Recovery and Reinvestment Act of 2009

1. Are attempts to protect U.S. firms from foreign competition, such as the Buy

American provision, good ideas? Explain.

The “Buy America” provision was not a good idea since it had no economic sense. This

is mainly because it led to loss of more jobs than those protected. One reason for this could be

the fact that American tariffs and provisions could protect inefficient local manufacturers from

their overseas competitors who are more efficient. Nevertheless, these domestic producers will

continue charging high prices for substandard products, leading to a reduction in retail sales,

which will in return result in reduced production and a subsequent loss of jobs to those working

in such industries. The “Buy America” policy could also make other countries which trade with

America to retaliate by applying the same policy. This would lead to a decline in trade between

America and the countries which adopt such a policy, thus causing further loss of jobs.

2. Explain why some American companies might be opposed to this provision.

The idea of “Buy America” may result in increased prices for domestic products, thus

lowering the purchasing power of consumers. Consequently, the consumers will have little or no

money to buy other products. This would in return lead to lower production, and this is one

reason why some companies might oppose this provision. Further, some companies may be

opposed to this policy since it may cause the foreign market to shrink after foreign countries

implement a similar policy.


Aljabery 2

3. Explain whether or not you believe the Buy American provision would create jobs

in the United States.

I don’t believe the Buy America provision would create jobs in the United States. As

mentioned above, the policy will result in American consumers and companies paying higher

prices for goods and services. Spending too much on a particular product will leave consumers

with no money to purchase products from other industries and this would lead to reduced

production in such industries, thus loss of jobs. Further, if America’s trading partners retaliate

and apply the same in their countries, this would reduce exports and will certainly cause declined

production in some industries, thus loss of jobs.

4. What do you think will be the economic consequences of a Buy American provision?

The ultimate consequence of the Buy America provision is a significant decrease in

United States exports to foreign markets. This would significantly harm the economy since there

would be little or no foreign exchange and jobs may be lost.

5. Do you believe the government should get involved in this aspect of private business,

even when the available funds are coming from the government? If so, why? If not,

why not?

No, the government should not get involved in this aspect of private business. This is

because even when the funds come from the government, it seems to allocate resources

unequally. Thus, since this is a free economy, the government should limit their intervention in

private businesses.

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