Econ 202 Paper

Charlemange. “The trade war within” The Economist April 20, 2011

The current financial crisis has been softened by the avoidance of a destructive protectionist war. Part of the EU’s revision of trade discounts for developing countries known as the generalized system of preferences (GSP). Tariffs can be cut or eliminated for poor countries and territories. Mr De Gucht wants to exclude countries ranked by the World Bank as upper-middle income and to re-establish those with separate free-trade agreements with the E.U. Others want to use trade policy to curb climate change and retaliate against China’s quotas on rare-earth metals.

This article relates to class material in terms of tariffs, imports, exports, quota, trade protection, and external costs associated with pollution. Tariffs are a tax levied on imported goods to increase or decrease imports. For example, “Portugal is against Pakistani bed sheet makers and Italy resists Filipino tuna exports”. When demand falls so does the world price for consumer goods in 1st world countries that are dependent on imports. Countries like Brazil and Argentina whom export half of their goods to the EU will be surpassed by a future trade deal. Export tariffs on these countries can cause producer surplus to rise, creating more DWL in the market. Trade protection historically has prolonged recessions and creates international tensions. Stronger countries in Europe will be forced to sign free-trade agreements or submit to demands on human rights and labor regulations. The EU government will benefit at the cost of some nations and costlier imports. Superpower China has been buying up precious metals that have become vital to several high-tech industries. Right now GSP covers less than 1% of Chinese exports to the EU. Excluding tariffs on exports for the poorest 49 countries in the world will improve international relations and boost their GDP while increasing total surplus. The costs associated with pollution are...