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Students Zone - Answers to Case Study Questions
CHAPTER 3: THE PROTECTION OF TRADE
3.1 SUGAR INDUSTRY
- Explain using graphs, the subsidies and tariffs which protect the sugar industry in the US and EU and the effect on the more efficient world producers (for example Brazil and Thailand) of the dumping of excess sugar production.
Answer
The graphs needed are those in the book – figure 3.2 gives the effect of tariffs in the DCs (US and EU). Production Subsidies are shown in Figure 3.3
For LDCs – subsidies which bring dumping means the supply curve shifts out and the world price falls (and therefore the price for Brazil and Thailand falls).
Tariffs will reduce demand for their product and excess supply on the world and home market (as they cannot sell abroad), so pushing down price
- Identify the effects on the differing economic agents for example, consumers and producers on these diagrams? Are there any other effects?
Answer
Need to look at consumer, producer and government effects (those for DCs are in the books). For Brazil & Thailand – consumers get lower price but producers suffer from this lower price and greater (subsidized) competition. Governments probably cannot afford to subsidize in similar fashion, and competition from US and EU is unfair (and protected by tariffs at home).
- What do you think is the economic justification for the US and EU undertaking such protectionism?
Answer
- Protect Agricultural jobs
- Protection vital industry for strategic/defensive reasons
- Could argue sugar should be restricted as not good for you – health reasons (but still why should it be EU based?)
- Powerful and vocal farm lobby – political reasons
Other chapter answers >>
- Case Study 1.2 Karstadt Undertakes Investment for Survival
- Case study 1.3 Europe's International Trading Future
- Case Study 2.1 Porter's Diamond
- Case Study 2.2 The Coffee Market
- Case Study 3.2 FSC Dispute
- Case Study 3.3 Beef Hormones
- Case Study 4.1 SEM Effects of Business
- Case Study 4.2 Africa's Economic Integration
- Case study 5.1 The Effect of Exchange Rates on Businesses – The Us Dollar
- Case Study 5 2 Real Exchange Rates in the Euro-Zone
- Case Study 6.1 SEC to Rethink Post-Enron Rules
- Case Study 6.2 A Controversial New European Directive
- Case Study 8.1 Cross-Border Banking Bids in Italy
- Case Study 8.2 The Future of the London Stock Exchange (LSE)
- Case Study 9.1 Back to Bread and Butter for Europe
- Case Study 9.2 Poductivity in European and International Labour Markets
- Case Study 11.1 Poorer EU Areas Lose Funding
- Case Study 11.2 A Diverse Approach to Curbing Greenhouse Gases
- Case Study 12.1 European and US Entrepreneurship Activity
- Case Study 12.2 EU Enlargement and the SME Sector
