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ProblemSet9bANSWERS

ProblemSet9bANSWERS - UBGA 118 International Trade Fall...

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UBGA 118: International Trade Fall 2008 Problem Set #9b ANSWERS (Due Tuesday, November 25, 2008) 1. Article Analysis: Read this article and answer the following questions. James Brooke, "Free Trade Debate in Australia". The New York Times , Thursday, August 5, 2004. The URL is: http://query.nytimes.com/gst/fullpage.html?res=9C07E4D6143CF936A3575BC0A9629C8B63&scp=2&sq=%2 2Free%20Trade%20Debate%20in%20Australia%22&st=cse . a. From the perspective of Australia, how does a free trade agreement with the United States differ from a tariff reduction that applies to all of Australia's trading partners? Free trade areas, and other preferential trade agreements, create a discriminatory trade regime which gives preferences to one nation over others, while unilateral tariff reductions are by definition non-discriminatory. This may create inefficiencies in the global economy allowing the United States to supply Australia when it is not necessarily the lowest cost producer—it only appears to be the lowest cost producer because it does not have to pay the tariff. When this occurs, the tariff revenue lost may not make up for the gain in consumer surplus.
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