Trade Problem Set 95 3-1

Use a partial equilibrium analysis to answer the following questions.

1. Demonstrate how a domestic consumption tax could turn a small importing country in free trade into an exporting country.

2. Demonstrate the national welfare effects of a specific production tax implemented by a small importing country.

3. Suppose that a country wants to subsidize exports in a particular industry, but, as a WTO member, it knows that it might become subject to a countervailing duty. What combination of purely domestic policies could this country implement that would have exactly the same effects? Explain.

International Trade Theory and Policy - Chapter 95: Last Updated on 1/07/08