1. To what extent (if any), should trade policy be used to address non-trade iss
ID: 1123004 • Letter: 1
Question
1. To what extent (if any), should trade policy be used to address non-trade issues? Provide 2-3 examples in support of your argument? (15 points) Graphically illustrate and carefully explain the economics of dumping. (15 points) Graphically illustrate and carefully explain import tariff analysis for the large country case. (1 points) 2. 3. 4. Graphically illustrate and carefully explain export subsidy analysis for the large country case How does a production subsidy differ in its impact on a country's welfare? (15 points)Explanation / Answer
1. I think trade policies can be and should be used significantly to address non-trade issues as long as it does not affect the economic utility of consumers or producers in the domestic market significantly. Trade or economic development does not exist in isolation from other social, political or international issues. Therefore, trade policies should be used to address non-trade issues which are potentially serious and have long-term repercussions. For example, the nuclear-weapon development in North Korea is a serious issue which can potentially affect the human civilization in general. So, if trade embargo or restriction can result in cancellation of nuclear weapon development in North Korea, such use of trade policy will be beneficial for the society as a whole. Similarly, if the USA wants to strengthen its ties with India using trade policy, such an address of a non-trade issue with trade policy will be welcome as India-US strategic alliance will have positive effects in areas such as counter-terrorism or defense. Lastly, India and Pakistan can use trade policies to address their rivalry and establish a better relationship. Both the countries have nuclear weapons and an escalation between them is in the interest of none. So, this is also a good application of trade policy to address a non-trade issue.
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