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Trade or Protect?

Posted by Economics Corner on 10:38 AM
Role play on the topic "Trade or Protect?"

The ASEAN Free Trade Agreement (AFTA) called for Malaysia to reduce tariffs in its car industry drastically.

Role 1: CEO of Proton
As CEO of Proton, you decide to lobby the government to press for a 2 year extension before the tariff reduction takes effect. Present arguments for your stance.

You may want to consider the effect of your stance on domestic firms, workers, economic growth etc.

v Imports of foreign cars, increased competition.
v Dumping of foreign cars
v Malaysian car firms cannot compete with the cheaper ASEAN car imports
v Malaysian workers maybe retrenched, wages may decrease due to increased competition
v Prevent reliance on foreign products
v Prevent great outflow of foreign exchange
v Continued monopoly of market, maintain supernormal profits.

Role 2: Secretary-general of ASEAN
As the secretary-general of ASEAN, present arguments why this AFTA deal will be beneficial to Malaysia.

You may want to consider the effect of the deal on Malaysian firms, workers, economic growth.

v Lower trade barriers => Malaysians gets access to greater car choices, higher utility, lower prices
v Domestic car workers may be laid off, but will move to productive sectors where Malaysia has comparative advantage
v Tariffs => direct more workers into car industry where their productivity is less, and direct workers out of other sectors where their productivity is greater; thus, restrictive trade policy would lower the overall productivity, and wages, of workers in Malaysia
v Ensure much needed reforms in the car industry in Malaysia
v Cheaper transportation costs by Malaysian firms =.> more competitive exports

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Economists' blog

Posted by Economics Corner on 10:29 AM
Do you know that some economists blog? Read their blogs to find out their views on current economic issues:
Greg Mankiw
Brad Delong

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