Economics Exam Questions on Trade Models, Tariffs, Dumping Cases, and Export Subsidies

Question 1: Trade Models and Pareto Improvement

For 1, if you write down information about the trade models that are irrelevant to this specific question, you will get only 1/3 of the points even if you have the correct answers in the mix. Copying everything from lecture notes because you have time and access is a bad strategy. It demonstrates that you don’t understand the question and will be penalized.

For 2, you need to offer both theoretical (with graphs) analysis and empirical evidence from credible sources. Traditional media is considered more credible than social media posts. Reports by governments, think tanks, consulting firms etc. can also be cited.

For 3, note that “copy and paste” is not summarizing. Zero points will be given to a “copy-and-pasted” answer. Use your own words.

When the questions require you to draw graphs, you must draw the graphs by yourself. No point for graphs “cut-and-pasted” directly from my slides.

1 (15 points) Are the following economic changes related to trade and factor movements a Pareto improvement? Why or why not? (Be concise and specific in your explanation for full credits.)

1) (3 points) Moving from autarky to free trade in the Ricardian model.

2) (3 points) Moving from autarky to free trade in the Specific-Factors model.

3) (3 points) Moving from autarky to free trade in the Heckscher-Ohlin model.

4) (3 points) Inward immigration (immigration inflow) in the Specific-Factors model.

5) (3 points) Inward capital inflow (FDI inflow) in the Heckscher-Ohlin model

2 (15 points) In the year 2018, the US imposed additional tariffs (on top of its MFN tariff rates) on billions of Chinese goods. President Trump tweeted on February 16, 2019 that “Billions of Dollars are being paid to the United States by China in the form of Trade Tariffs!”

1) (7 points) Theoretically, who might be paying for the tariffs on Chinese goods? Analyze with what you learn from this course. Draw graphs to assist your argument.

2) (5 points) Who’s paying for the tariffs on Chinese goods according to empirical investigations? Cite empirical evidence with links to your sources. Be specific in your explanation for full credits.

3) (3 points) What does the empirical evidence in part 2) imply about US market power and import tariffs as US’s weapon in the trade war? Explain.

3 (20 points) Read the dumping case at https://www.cbsa-asfc.gc.ca/sima-lmsi/mif-mev/uds-eng.html 

Answer the following questions with information in the above case and the WTO rules on anti-dumping and countervailing duties.

1) (5 points) Name the complainant that started this dumping case. Can the complainant represent the Canadian industry? If yes, why? If no, why not?

2) (10 points) Which entity carried out the dumping and subsidy investigation? Summarize the general findings on margin of dumping and subsidies for the period June 1, 2019 to November 30, 2020. (Provide both range and country-level weighted average)

3) (5 points) What is the other necessary condition for a country to impose anti-dumping and countervailing duties? Which entity carried out the investigation? What’s the conclusion and decision?

4 (20 points) Read the article entitled “Effects of eliminating EU’s export subsidies” by Susan Leetmaa at the US Department of Agriculture, Economic Research Service (2001).

Answer the following questions with information in the article and what you learn about export subsidies under perfect competition (to agriculture) in this course.

1) (4 points) List two alternative policies to export subsidies that are mentioned in the article.

2) (10 points) Draw a graph to analyze the theoretical impact of eliminating export subsidies to pork on the pork price, consumption, production, exports, consumer surplus, producer surplus, government revenue, and regional welfare in EU. Clearly label the graphs for full credits.

3) (4 points) If we assume that Euro is stronger than US Dollar from 2000 (baseline) to 2007/2008, what are the predicted impact (in percentage change) of eliminating export subsidies on the EU and the world market pork prices in 2007/2008? What are the predicted percentage change in EU’s production, and exports of pork? Express the percentage change using the quantity and price symbols you use in part 2) for full credits (e.g., percentage change in production = (Q3-Q1)/Q1=5%).

4) (2 points) Would eliminating EU’s export subsidies affect Canadians? If yes, how would Canadian welfare change? If no, why not?