The following appeared as part of an article in a weekly newsmagazine:
“The country of Oleum can best solve the problem of its balance of trade deficit by further increasing the tax on its major import, crude oil. After Oleum increased the tax on imported crude oil four months ago, consumption of gasoline declined by 20 percent. Therefore, by imposing a second and significantly higher tax increase next year, Oleum will dramatically decrease its balance of trade deficit.”
Discuss how well reasoned . . . etc.
The argument concludes that by imposing a second and significantly higher tax on crude oil imports, the country of Oleum will dramatically decrease its trade deficit balance. To support this conclusion, the argument claims that the best solution to solve Oleum’s trade deficit problem is by further increasing the tax on its major import, crude oil. Stated in this way, the argument fails to consider several key factors on the basis of which it could be evaluated. The conclusion of the argument relies on assumptions for which there is no clear evidence. Therefore, the argument is unconvincing and has several flaws.
First, the argument readily assumes that crude oil consumption will not decrease by increasing import taxes on it. This statement is a stretch and not substantiated in any way. For instance, to avoid high price of gasoline, people of Oleum might switch to hybrid or electric vehicles, take the bus or train to work, or carpool with others. Clearly, increasing import taxes may not decrease trade deficit. Further, if there is a domestic supplier of crude oil which is unaffected by import taxes, people might consume more of this supplier’s gasoline. The argument could be much clearer if it explicitly stated that there are no domestic crude oil suppliers and consumption of gasoline will not decrease with increased import taxes.
Second, the argument claims that by increasing the import tax significantly next year, Oleum will dramatically decrease its trade deficit. This is again a very weak statement as the argument does not demonstrate any correlation between increased taxes and decreased trade deficit. In fact, the argument provides evidence that consumption of gasoline decreased by 20 percent within four months after the increase in import tax. If this is any indication, gasoline consumption might probably go down next year as well. If the argument had provided evidence that increased import tax will not lead to decreased gasoline consumption, then it would have been a lot more convincing.
Finally, has the author considered other areas of trade where import taxes could be increased? Also, has the author considered increasing the exports of Oleum in order to decrease its trade deficit? Without convincing answers to these questions, one is left with an impression that the claim is more wishful thinking than substantive evidence.
In conclusion, the argument is flawed for the above mentioned reasons and is therefore, unconvincing. It could be considerably strengthened if the author had mentioned all the relevant factors, such as correlation between increased tax on crude oil and non-decreasing consumption of gasoline, other areas of trade where trade deficit could be minimized. In order to assess the merits of the claim that increasing import tax significantly next year will dramatically decrease trade deficit, it is essential to have full knowledge of all contributing factors. Without this information, the argument remains unsubstantiated and open to debate.