Please read the article “Indonesia’s win against Australia’s tariff regime may embolden others” by Emma Connors from Financial Review on May 18, 2020.
Note that students need to answer questions 1 and 2 below based on the contents of the article. You can find the article following this assignment’s questions.

1). Please graphically illustrate the dispute between Australia and Indonesia using concepts of demand for A4 copy paper and supply of A4 copy paper.

Hint: you need to be able to draw the equilibriums in autarky and after Australia and Indonesia trade freely with each other. Then you need to illustrate what happens when Indonesia starts applying dumping to its A4 copy paper exports to Australia.

2). The articles quotes Australian Trade Minister Simon Birmingham as saying in a television interview the following:

“It was a mixed determination. They won some points, we won on others....”

What are the points won by Australia and the points won by Indonesia? Please explain your answer thoroughly.

3). Assume that the world consists of only two countries: Australia and Indonesia. Australia’s demand curve for A4 copy paper and Australia’s supply of A4 copy paper are

D= 100-20P

S= -20+20P
Indonesia’s demand curve for A4 copy paper and Indonesia’s supply of A4 copy paper are:

D*=80-20P

$*=40+20P
where D, S, and P denote demand, supply, and the price in Australian dollars, respectively.

Please answer the following questions:

If Australia and Indonesia can freely trade with each other, please graphically show the trade patterns between them? Specifically, which country will be the exporter of A4 copy paper? What is the price of A4 copy paper in free trade? What is the volume of their bilateral trade?

4). Given the information in Question 3 assume now that Australia’s government decides to impose a specific tariff of AU$ 1 on Australia’s A4 copy paper imports from Indonesia. The government may ask domestic consumers who buy the imported A4 copy paper to pay the tariff. Alternatively, the Australian government may ask the Indonesian producers to pay the tariff if they sell A4 copy paper to Australian consumers.

2

MAE 213 International Trade – Trimester 2, 2020 Written Assignment

Please graphically show that the effects of the tariff on the patterns of trade are the same no matter whether Australian A4 copy paper consumers or Indonesia’s A4 copy paper producers have to pay the tariff.

Hint: Please determine and graph the effects of the tariff on the following: the price of A4 copy paper in each country, the quantity of A4 copy paper supplied and demanded in each country, and the volume of trade. Note that the tariff will influence Australia’s import demand if Australian consumers of A4 copy paper have to pay the tariff. Alternatively, the tariff will influence Indonesia’s export supply if Indonesian A4 copy paper producers have to pay the tariff.

5). Determine the effects of the specific tariff on the welfare of Australia’s producers, consumer, and the government.

End of the Assignment’s Questions

The online link to the article is

https://www.afr.com/politics/federal/indonesia-s-win-against- australia-s-tariff-regime-may-embolden-others-20200515-p54t9p.