PLEASE READ THE FOLLOWING TEXT AND ANSWER THE QUESTIONS
The Bush Administration, despite the imposition of tariffs on steel, the imposition of trade restrictions on Vietnamese catfish and huge new agricultural subsidies, claims that it is a proponent of free trade. With global trade negotiations due to begin shortly, it has submitted a plan to eliminate all tariffs on industrial and consumer goods by 2015. Administration officials say their proposal would eliminate about $18 billion in tariffs that consumers currently are paying. Before the reductions take place, however, other countries would have to reduce or eliminate the tariffs that they impose on goods imported from the United States, and the reductions would have to be implemented on a more accelerated timetable.
American tariffs are lowest on manufactured goods, averaging about 5 percent, and are lower than in most other countries. Tariffs on clothing and accessories are higher, ranging from 13 to 20 percent. Agricultural goods carry the highest tariffs and subsidies, averaging 62 percent.
The current proposal, if agreed to, calls for the elimination of any U.S. tariff that is 5 percent or less by 2005, a reduction to 8 percent by 2010 for goods with higher tariffs, with the most difficult tariff issues to be dealt with by 2015. Since other countries have generally higher tariffs on manufactured goods, their tariffs will have more substantial reductions that will expose their domestic industries to intense competitive pressure. Anti-dumping measures and “safeguard” tariffs, such as those imposed on imported steel are not expected to be eliminated. Many Latin American and Asian countries will likely oppose the Bush plan because of both the timing and magnitude of the cuts.
Although U.S. tariffs on agricultural goods are the highest, the current plan does not deal with this industry. A plan similar to the current proposal to reduce agricultural tariffs and subsidies was introduced last summer, but was not received well by the European Union.
Edmund L. Andrews, “U.S. to Seek To Abolish Many Tariffs,” The New York Times, November 26, 2002.
- Economic theory suggests that free trade has the potential to benefit all parties. Briefly describe this theory.
- What is “dumping?” What is meant by an anti-dumping measure?
- Suppose that tariffs are eliminated in this and other countries. What industries will benefit from the removal of tariffs? What industries will be penalized?
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