THE EFFECTS OF PROTECTIONISM TRADE THEORY
Relative to the world market, the United States is a producer and importer of sugar.
(a) Explain the effects of an import tariff on:
– U.S. sugar prices
– levels of production and consumption
(b) Some senators argue that free trade is harmful to the United States and the use of protectionist trade policies (such as sugar tariffs) is the best way to protect domestic sugar producers from foreign competition. Is this argument economically valid? Why or why not?
(c) Would the use of protectionist trade policies be justified if they were implemented to reduce the level of unemployment? Explain.