If you were a strong supporter of free trade and in charge of U.S. international trade policy, would you cut tariffs and quotas, or would you negotiate with the nation's trading partners, maintaining trade barriers unless they lowered theirs also? Discuss.

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Casey DurganLv2

14 Jun 2019

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Related questions

As a consumer, describe your benefits regarding the availability of a wide range of low-cost, high-quality goods and services which are produced in other countries, such as, cell phones and flat-screen televisions.

As a voter, describe your concerns regarding international trade, such as the politics of free trade versus protection. Do you think tariffs or quotas should be imposed on imported goods to provide U.S. producers an "even playing field"? Before you advocate for tariffs and quotas think about how other countries will retaliate.

Finally, as an employee, describe your concerns regarding the loss of U.S. jobs, since international trade spurs job offshoring, and it also provides freer access to U.S. markets by foreign producers.

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Participate in a discussion with your classmates regarding how international trade affects our lives. You have a big stake in the politics of free trade versus international trade protections. As a buyer, your self-interest is hurt by tariffs and quotas on imported goods. Although, as an employee, your self-interest might be hurt by offshoring, or by freer access to U.S. markets by foreign producers. Discuss and share the trade policies that best serve your self-interests, and those that best serve the social interest. Please include the concepts and arguments pertaining to free trade versus trade protections.

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Problems and Applications Q4

Consider trade relations between the United States and Mexico. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are shown in the following payoff matrix:

		United States' Decision
		Low Tariffs	High Tariffs
Mexico's Decision	Low Tariffs	$25 billion, $25 billion	$10 billion, $30 billion
Mexico's Decision	High Tariffs	$30 billion, $10 billion	$20 billion, $20 billion

The dominant strategy for the United States is to always choose tariffs. The dominant strategy for Mexico is to always choose tariffs.

True or False: The Nash equilibrium outcome for trade policy is for the United States to have high tariffs and Mexico to have low tariffs.

In 1993, the U.S. Congress ratified the North American Free Trade Agreement, in which the United States and Mexico agreed to reduce trade barriers simultaneously.

True or False: Given the trade strategy decisions in the table, the United States is worse off and Mexico is better off with this new trade policy.

Based on your understanding of the gains from trade (discussed in Chapters 3 and 9), which of the following statements accurately characterize how well the payoffs indicated for the four possible outcomes actually reflect a nation's welfare? Check all that apply.

The payoffs in the upper right and lower left corners of the matrix reflect a nation's welfare because the nation with lower tariffs is better off since that nation is more open to trade.

The payoffs in the upper right and lower left corners of the matrix do not reflect a nation's welfare because tariffs hurt the overall total surplus, so both countries' welfare should decline regardless of who charges the high and low tariffs.

The payoffs in the upper left and lower right corners of the matrix reflect a nation's welfare because they show that trade is beneficial and tariffs are a barrier to trade.