Question
Suppose D_plasticandS_plasticare Uzbekistan's domestic demand and supply curves for plastic. Suppose that free trade price of plastic isP_chinese_plastic= 2*D and P_korean_palstic = 3*D. Assume that
Suppose D_plasticandS_plasticare Uzbekistan's domestic demand and supply curves for plastic. Suppose that free trade price of plastic isP_chinese_plastic= 2*D and P_korean_palstic = 3*D. Assume that Uzbek plastic industry is too small to affect the world's plastic prices. Also consider that the quality of Chinese and Korean plastic is identical.
Now suppose that after having - historically - no protectionism policies against foreign goods, Uzbekistan decided to establish a customs union with Korea to facilitate bilateral trade between the countries and strengthen political relations. According to the Customs Union agreement, Uzbek government started imposing 100% tariffs on imports of plastic from non-member countries;
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