The document discusses protectionism and trade liberalization. Protectionism refers to restricting trade between countries through tariffs, quotas, and non-tariff barriers. Tariffs increase import prices while quotas restrict quantities. Non-tariff barriers make trade costly through regulations and standards. Countries adopt protectionism to shield domestic industries and jobs and for strategic or political reasons. Trade liberalization aims to reduce these barriers by promoting specialization, efficient resource allocation, and market access through agreements like GATT and the WTO. However, fully liberalizing world trade faces challenges in removing barriers like agricultural subsidies.
6. Impact of a Tariff on Steel Price of Steel (US $ per kg) Quantity of Steel Bought and Sold from Abroad S D 20 S + Tariff Amount of the tariff per unit 500 28 350
7. Impact of a Quota on Steel Price of Steel (US $ per Kg) Quantity of Steel Bought and Sold from Abroad S D 20 500 Pre-trade position before a quota. Quota level 250 30 The quota restricts the supply to a set amount (250 in the example) which is likely to result in a shortage of this good and a subsequent rise in its price.
