International Trade* On the Iron Range in Northern Minnesota, about 2,000 miners
ID: 1127023 • Letter: I
Question
International Trade*
On the Iron Range in Northern Minnesota, about 2,000 miners have been laid off over the last couple years. These miners worked in taconite mines. Taconite is used to make steel. Currently the world has an excess of steel capacity due primarily to the slowdown in the Chinese economy. As China has shifted away from building more industry and focused more on building a consumer economy, their need for steel has dropped dramatically. As a result, the demand for taconite and iron ore has also dropped. With the drop in demand, miners are laid off. The miners have been aggressively pushing the national legislators from Minnesota to increase tariffs on imported steel and set import quotas.
If the tariffs and the quotas were passed into law, who would be hurt? Explain
*”In any case, cheap imports were a windfall for American consumers. Excluding food and energy, prices of goods have fallen almost every year since NAFTA. Clothes now cost the same as they did in 1986; furnishing a house is as cheap as it was 35 years ago. More trade brought more choice, too. Robert Lawrence and Lawrence Edwards, two economists, estimate that trade with China alone put $250 a year into the pocket of every American by 2008. The gains from cheap stuff flowed disproportionately to the less well-off, because the poor spend more of their incomes on goods than the rich.”
“Trade at what price,” The Economist, April 2-8, 2016
Explanation / Answer
If the tariffs and quotas are passed in the form of laws then this law will reflect as a policy all over the US, thus all the industries in the US which uses steel as a raw product, will be affected, because imposition of tariff will lead to high pricing of steel, thus industries like Automation Industries, Infrastructure Development Companies, Railway Manufacturing, Housing Development Agencies etc. will be affected. Also the political and economic relations with the countries from which previously steel was imported will degrade, thus affecting the international relations, also imposition of tariffs is against the norms of WTO, thus as a global leader the US image will deter at the international level, and it will be argued as a protectionist.
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