Suppose that with free trade, the cost to the United States of importing a keyboard from Mexico is $13.00, and the cost of importing a keyboard from China is $11.00. A keyboard produced in the United States costs $18.00.

Suppose further that before NAFTA, the United States maintained a tariff of 75% against all keyboard imports. Then, under NAFTA, all tariffs between Mexico and the United States are removed, while the tariff against imports from China remains in effect. Assume that the tariff does not affect the world price of keyboards.

In the following table, indicate which country the United States imported keyboards from before NAFTA. Then indicate which country the United States imported keyboards from under NAFTA. Check all that apply. (Note: Leave the row blank if the United States doesn't import from either country.) United States Imports from . . . Scenario Mexico China Before NAFTA Under NAFTA In the following table, indicate whether each stakeholder gains, loses, or neither gains nor loses as a result of NAFTA. Stakeholder Gains Loses Neither Gains nor Loses Chinese producers O O 0 Consumers in the United States 0 O O U.S. government 0 O O O Mexican producers creation This is an example of trade V resulting from a regional agreement.