Question
You are a govertnment advisor in a country. The decision makers apprached you with a case proposed by the representatives of the steel industry which
You are a govertnment advisor in a country. The decision makers apprached you with a case proposed by the representatives of the steel industry which argues that a 15% tariff imposed on steel imports would be beneficial as the profit of steel producers would increase by 20% according to their calculations. The argument says that this extra profit would allow to keep 12,000 jobs in the industry, plus the government revenue from the tariff would allow to finance a restructuring program in the industry which may allow it to catch up with the most competitive producers in the world. if successful, this program would allow for the reduction of tariffs in the medium run and keep the steel producers on the market. Try to draw the attention of government decision makers on the flaws of this argument! Putting together the potential drawbacks and advantages of the proposal, what would be your advice for the government?
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