Equality of treatment provisions of the gatt

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The U.S. field a trade complaint against the European Union's Stabex program in the 1990s. The WTO subsequently ruled that Stabex violated the Equality of Treatment provisions of the GATT. The U.S. then imposed tariffs on a variety of European goods as a result.

Suppose the US market for gourmet cheeses is currently 16 million pounds, with a prevailing price of $10 per pound, with imports accounting for 50% of that. If the US imposes a $4 per pound tariff, total demand falls to 12 million pounds, with imports taking only 25% of the market. Illustrate this situation in a well drawn supply-demand curve, and calculate:

  • the loss in consumer surplus
  • the gain producer surplus
  • the tariff revenue
  • the dead-weight loss

Reference no: EM132460842

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