Basically what Argentina is doing is increasing the amount
of tax on the goods they import. As Affirmed by the Argentinian President
Cristina Fernandez de Kirchner, these tariffs are supposed to be promoting
growth and encourage domestic producers to substitute imports for domestic
goods which could create more jobs. In actuality this has been hurting
manufacturers because they cannot meet production targets. This obviously means
a lower quantity of goods produced and even worse fewer goods exported.
The negative consequences of this decision can be explained
by using the Ricardian Model discussed in chapter 2 of the textbook. Seeing
that the manufacturers in Argentina cannot buy as many raw materials as before,
they might have to lay off some workers to compensate for the shortages. Because
of these factors, their production possibility frontier is restrained and moves
down a certain degree. Likewise, the consumers and producers of these products
will have a lower degree of utility because of lower production causing the
relative price of the goods to increase.
If Argentina has a higher relative price for their goods
this means the opportunity cost is greater when choosing between which goods to
produce. These implications can severely stunt the growth of Argentina because
it has the ability to take away any comparative advantage they might have with
other countries. In my opinion, I believe the only way this could be successful
for their government is that if the amount of tariffs is greater than the
amount lost in trade. I do not see that happening and what’s worse is that the
consumers and producers in Argentina will have to suffer from their government’s
actions.
http://www.energy-daily.com/reports/Argentine_import_tariffs_hitting_exports_999.html
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