You are writing a report on the effect of trade policy for the steel sector of a small country.

Suppose that the country is an importer of steel.

a) Show and explain the welfare effects of an import tariff on steel. (1 Marks) )

b) Using what you have learnt in the course on the political economy of international trade policy, give

two reasons why actual trade policy might not always be the policy that maximizes national welfare

but rather something that prioritizes the welfare of certain groups more than others? Explain your

answer. (1 Marks)

c) Use your knowledge about trade policy to evaluate each of the following statements:

"An excellent way to reduce unemployment is to enact tariffs on imported goods."

"Tariffs have a more negative effect on welfare in large countries than in small countries."

"Automobile manufacturing jobs are heading to Mexico because wages are so much lower

there than they are in the United States. As a result, we should implement tariffs on

automobiles equal to the difference between U.S. and Mexican wage rates."