WINNERS AND LOSERS FROM FREE TRADE
AND TRADE RESTRICTIONS
The United States produces cars and it also imports cars from other countries. Using the decision to import cars from Japan as an example, first try to identify winners and losers from free trade. Then try to identify winners and losers when we place restrictions on trade or charge foreign companies money (a tariff or tax on imports) to bring their goods into this country. Briefly explain your answers in the spaces provided.
Part 1: Free Trade
Assume there are no limits to the number of Japanese cars that Japanese companies may sell in the United States and that the United States doesnÕt charge any tariffs to Japanese companies that sell Japanese cars in this country.
1. Which Americans are better off? Why?
2. Which Americans are worse off? Why?
3. Which Japanese are better off? Why?
4. Which Japanese are worse off? Why?
Part 2: Restricted Trade
Assume the United States now charges Japanese car companies a tariff to sell their cars in this country and also limits the total number of Japanese cars they may import.
1. Which Americans are better off? Why?
2. Which Americans are worse off? Why?
3. Which Japanese are better off? Why?
4. Which Japanese are worse off? Why?