Question 3 (This question has two parts: a and b)

You need to read Article 1"New Zealand wins WTO appeal over Australia apple ban"to answer the questions below. ( I have attached the article below.)

Part (a)

Given the information in the article, use the concepts of apple supply and demand for apply to illustrate the situation whenAustralia's restrictions werein place.

Hint: you can assume that the world consists of two countries: Australia and New Zealand and the two countries can trade with each other.

Part (b)

Use the graphs in Part (a) to explain what happens to Australia's market of apple after the "WTO's appellate body largely upheld thefindings of a panel ofexperts in August that condemned the restrictions". Compare the Australia'swelfare in the presence of the restrictions on its apple imports and after these restrictions being removed.

Article 1

(Source: Reuters, November 30, 2010)

New Zealand wins WTO appeal over Australia apple ban

* WTO appeal body largely backs original ruling * Australian restrictions seen as unscientific

* Import measures effectively banned NZ apples

GENEVA, Nov 29 (Reuters) -Australia's 90-year-old restrictions on imports of New Zealand apples are unscientific and break international trade rules, theWorld Trade Organization's top court ruled on Monday. The victory for New Zealand should allow it to resume apple exports for the first time since 1921 to

its biggest trading partner and clear the way for sales to other markets where its fruit is also banned.

The WTO's appellate body largely upheld thefindings of a panel of experts in August that condemned the restrictions, which New Zealand says amount effectively to a ban on its fruit, and called on Australia to bring its regulations into line with international trade rules. Like many disputes about trade in food, this one turned on health and safety standards. Australia imposed the restrictions in 1921 to protect local apple trees from fire blight, a pest that also affects pear trees and rose bushes.

But New Zealand argued that the restrictions, revised in 2006, were unscientific, a view backed by the original WTO panel which did not find in favour of New Zealand on all counts. Australia said it was appealing that ruling to protect Australian agriculture from health risks.

New Zealand officials estimate that lifting the Australian ban could boost apple exports by NZ$30 million ($22.4 million) over two to three years from NZ$400 million in 2009good news for New Zealand producers such as Turners & Growers TUR.NZ.

A recent study by Malcolm Bosworth and Greg Cutbrush, two visiting fellowsat the Australian National University's Crawford School of Economics andGovernment, found that the ban had driven up the price of apples for Australian consumers. The study, backedby New Zealand's apple growers'association, Pipfruit, said Australia had the second most expensive apples in

the world, after Japan, and the restrictions had effectively transferred A$2 billion ($1.93 billion) to Australian growers from consumers between 2001/02 and 2007/08.

End or Article 1