Buchanan makes it harder for foreigners to gain access to the U.S. market then he is creating an
uncompetitive environment. If a tariff were put into place it would raise the price of the applicable
goods in the U.S. and create an incentive for domestic producers to increase production. However,
consumers will demand less and look for substitute goods. Imports will de!
cline because Japan and China will have to lower their domestic prices which will lead to less producers
and an increase in demand. The end result is that the U.S. current account deficit will decrease and
might even become a surplus. However, this is the most inefficient way to accomplish such a goal.
Increasing savings or reducing the government deficit is the first-best policy to reduce the current
account deficit. Unambiguously the terms of trade gain will always be outweighed by the efficiency loss
that results from a tariff. Economies of scale cannot be achieved because tariffs fragment world markets
and attract too many firms to enter the protected industries as a result of reduced foreign competition
and increased profits. Buchanan feels that through tariffs (which he labels a foreign consumption tax)
import substitution will stimulate growth in the American economy. The main problem with this mode of
thinking is that tariffs allow an industry to survive but the!
y do not promote efficiency. If Buchanan feels that America needs jobs and has lost its dominant role in
the world economy he should focus on promoting exports. The very countries that he is condemning for the
downfall of the American economy all have followed “industrialization oriented primarily toward export
rather than domestic markets.” However, the solution that he should be looking at for the current
account deficit is staring himself in the mirror every morning. Politicians must act fiscally
responsible and reduce government spending because it is the deficit that causes the problem. As the
deficit goes, so goes America’s current account balance.
Pat Buchanan feels that protectionism is the answer to re-establishing the U.S. as the world’s dominant
industrial nation. Through analyzing his policies it becomes evident that though his vision is shared by
many his means of achieving it are economically fallible. If he implemented his policies he would
accomplish the very result which he is condemning. Buchanan’s economic platform is pandering to the
notions of ill-informed people. If we think of the U.S. as a boat, he is trying to patch a leak, and in
doing so, has created two new ones. Lets just hope that level heads prevail and he is not elected or we
might just have to bail water to prevent the mighty U.S. from sinking.
BIBLIOGRAPHY
Buchanan, Pat, “An American Economy for Americans” http://www.buchanan.org/america.html
Buchanan, Pat, “Time for Economic Nationalism” http://www.buchanan.org/econ1.html
“In Praise of Free Trade”, Newsweek, July 12, 1993
King, Philip, International Economics and International Economic Policy: A Reader. Singapore:
McGraw-Hill Book Co., 1990
“Not so absolutely fabulous”, The Economist, November 4, 1995
Paul Krugman and Maurice Obstfeld, International Economics. New York: HarperCollins
College Publishers, 1994
The abuse of economics: Common economic fallacies, UK: The Economist, 1996
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