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Model predictions of tariff acceptability
1. You are an advisor to the government of Argentina. Argentina is considering placing a tariff on imports of cotton. Please prepare a report for the president that evaluates this proposal base on the criteria listed below. you may assume for the purpose of this exercise that the import tariff has an effect equivalent to closing off trade in cotton.
A) why would Argentina want to limit imports of cotton? What does this suggest about the natural free trade pattern of specialization in Argentina? i.e. would we expect that it would be a net importer or exporter? Is Argentina likely to have a comparative advantage in the production of cotton?
B) Which group(s) within Argentina will likely support this tariff? which will oppose it ? Please justify you answer by citing specific models learned in class.
C) Will the country as a whole be better or worse off with the tariff? Please comment on what each of the 5 models we've learned in class would say about the issue.
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