Arguments for and Against Trade Control/Protection · Paper 2 — Free Economics HL Practice Questions

Country X, a developing nation in Southeast Asia, has recently imposed a tariff of $15\%$ on imported rice. Prior to the tariff, the world price of rice was USD 400 per tonne, and Country X imported $2$ million tonnes annually. Domestic producers supplied $1$ million tonne at this price. After the tariff, the domestic price rose to USD 460 per tonne. Domestic consumption fell to $2.5$ million tonnes and domestic production increased to $1.5$ million tonnes. The government argues the tariff is necessary to protect domestic farmers from volatile world prices and to ensure food security.

Country Y, a high-income European nation, has a domestic steel industry in decline due to competition from lower-cost Asian producers. In 2023, the government imposed a quota limiting steel imports to $500{,}000$ tonnes per year, down from $1.2$ million tonnes previously. The domestic price of steel rose from USD 800 per tonne to USD 950 per tonne. Domestic steel output increased from $2.0$ million tonnes to $2.3$ million tonnes. Consumer groups argue the quota harms manufacturing firms that use steel as an input, while the government claims it preserves jobs in the steel industry.