tariff trade hw

1 11. Suppose that the US. government is under heavy pressure from the Rollerblade and K2 lgg companies to put the brakes on imports of Bauer in-line skates from Canada. The protec- tionists demand that the price of a $200 pair of in-line skates must be raised to $250 if their incomes are to be safe. The U.S. government has three choices: (1) free trade with no protection, (2) a special tariff on inline skates backed by vague claims that Canada is using unfair trade practices (citing Section 301 of the Trade Act of 1974), and (3) forcing Bauer to agree to a voluntary export restraint. The three choices would lead to these prices and annual quantities: With Free Trade With an $80 Tariff With a VER Domestic US. price per pair $200 $250 $250 World price per pair $200 $170 $170 Imports of in-line skates (millions of pairs) 10 6 6 Note that the $80 tariff reduces imports by 4 million pairs a year, the same reduction that the VER arrangement would enforce. 0. Calculate the US. not national gains or losses from the tariff, and the US. gains or losses from the VER, relative to free trade. Which of the three choices looks best for the United States as a whole? Which looks worst? 1). Calculate the net national gains or losses for Canada, the exporting country, from the tariff and the VER. Which of the three US. choices harms Canada most? Which harms Canada least? c. Which of the three choices is best for the world as a whole? anauiammaen