I remember in an economics class once hearing that everyone is better off if every place (country, state, town, region, whatever) produces and exports whatever they produce best and imports whatever somebody else can produce cheaper, and nobody puts up trade barriers. The idea seems great on it's face--everyone is creating as much value as they possibly can, and nothing costs more than however much the most efficient producer charges. But there are some major flaws in this philosophy.

The problem is that some people aren't going to be able to produce anything (or at least not enough products) enough more efficiently than everyone else to enable them to export. Even if they do manage to be marginally more cost effective than everyone else in production, the costs involved in exporting the product eat up the difference and make profitable export impossible.

Is it in the best interests of such people to buy imported goods only, since they'll be cheaper than the same things produced locally? If they have enough in the bank to last them for the rest of their lives and the lives of all the coming generations that they care to prepare for, sure. But of course, only in a fantasy world would that be the case. If they import everything and produce nothing, obviously they're going ot run out of money really soon. Then they won't be able to import anything, and they'll have to start producing for themselves--only they won't have any capital to start with, so it'll take a very long time to ramp up production. Clearly, in some cases, buying locally is a better mid to long term strategy than importing.

So how do you convince people to buy locally when an importer is offering them the same goods for less? Unless the people have the big picture clearly in mind and are willing to sacrifice for the good of the community, it won't happen. Consider WalMart in the U.S. I shop at WalMart because for many, many things that I buy, they have the best prices. I don't put a lot of thought into whether WalMart is driving local businesses under. I've heard that communities that WalMart moves into usually end up with higher unemployment a few years down the road, but I don't feel the pain, so my buying behavior doesn't change.

Reader Comment:
Government’s Role in Times of Transition » Alpha Gecko said:
[...] low priced foreign goods are killing domestic industries, then sometimes tariffs or other trade barriers may be appropriate. Better to bring in money through tariffs then spend money through [...]
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I think in many cases, the only way to ensure that local economies survive is to create artificial advantages for local businesses--import tariffs, subsidies, etc. I'm generally very much a free-market capitalist (IMPORTANT NOTE: by this I do NOT mean that I favor what most people seem to think of when they hear the word "capitalism", ie. big business getting special favors from government to keep little businesses from people able to compete, but markets where the playing field is level and all businesses are held responsible for any harm they do), so it was surprising to me to realize that (I think it was the movie Gandhi, where he talks about not buying cloth from England, that got me thinking about it).

So, when someone else puts up trade barriers, should we respond in kind? That's where the decisions get difficult. If "someone else" is close to being our economic equal--or if the people in the industry they're protecting are near equals to our people in the same industry, perhaps so. Hopefully, doing so would be followed by negotiations resulting in both side dropping the barriers.

In my opinion, the legitimate uses of tariffs, subsidies and the like are to support local economies that wouldn't survive without them, to temporarily boost economies while they build the capital and infrastructure needed to survive without protection, and to temporarily support dying industries in order to provide a little extra time for people to transition to other industries.