By H. Peter Gray
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Additional resources for Free Trade or Protection?: A Pragmatic Analysis
One possibility is that the domestic industry will have been reduced to one giant so that a domestic monopoly exists and which would offer grounds for monopoly rents if the underlying international conditions were to change favourably in the future. A still less attractive outcome is the possibility that the domestic industry will be eliminated, and the foreign suppliers will come from a single country: under such circumstances, one might expect the possibility of collusion among the suppliers of imports to exist, and for the domestic market to be cartelised.
This may be true, but politicians have not been educated in the economic theory of adjustment because traditional economics has emphasised the ultimate equilibrium, and not the approach to that equilibrium. Political weakness is not impossible, but no politician can reasonably be expected to legislate efficient policies for adjustment-through-time (if they are possible) when no one supplies a logical framework to support such policies, and with which a politician may fend off the pleas and pressures of interested parties.
Once again the steel and automotive industries of western Europe and North America are the best examples. The 'Domestic Inefficiency' 39 automotive industries have been appealing for protection from Japanese imports. In western Europe, the problem of the steel industry is enhanced by ethnic divisiveness in Belgium and by the fact that the steel corporations are, in some countries at least, publicly owned, and the government is involved in the issue in a direct economic as well as a political economic dimension.