2. When countries open up and begin to trade with cach other, there are winners

Question

2. When countries open up and begin to trade with cach other, there are winners and losers Consider two markets: the import market where the country produces some of the good domestically and also imports some of the good, and the export market where the country consumes some of the good domestically and also exports some of the good. Consider the players: the owners of the companies in each market, the workers at the companies in each market, and the domestic consumers of the two goods. Identify the winners and losers. Winners Losers Import Industry Export Industry When countries restrict trade they most often implement tariffs or quotas on the imported good Who wins from the tariffquota: Who loses as a result of the tariff quota: When imposing tariffs, a country implicitly places more weight/value on those who benefit from the tariff as opposed to those who lose. Why do you think this is? If we want to help those who lose out as a result of trade, is there an alternative to tariffs/quotas?

Explanation / Answer

When importing country imposes tariff/quota:

Winners from tariff/ quota- Domestic producers, whoever holds import licence

loosers - Domestic consumers, non protectd producers

When imposing a tariff or quota , country focuses more on those who benefit, because benefit matters more As there are more loosers from import than winners. also the loss is not much.

to help out those who loose from tariffs and quota, they can be provided with subsidies.

winners loosers Import Industry consumers in the importing country owners in the importing country,workers in the importing country Export Industry owners in the exporting country,workers in the exporting country consumers in the exporting country,

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