This document discusses agricultural trade policy and arrangements. It covers topics such as reasons for restricting trade, forms of trade restrictions, and the welfare effects of policies like tariffs and quotas. Preferential trading agreements are examined as well, including reasons for forming them and debates around whether they create or divert trade flows. Different levels of economic integration between nations through arrangements like free trade areas, customs unions, and common markets are also outlined.

1. Agricultural Trade Policy and Arrangements Chapter 19

5. Page 371 The equilibrium price in the U.S. market is P US . at prices above P US , the market would exhibit excess supply conditions. At price P E , for example, producers would supply QS US3 while consumers would only want QD US4 .

6. Page 371 The market equilibrium in Japan occurs at P j . At prices below P j , excess demand conditions will occur. At P E , for example, consumers were willing to buy QD j4 while producers only wished to supply QS j3 .

7. Page 371 U.S. price where excess supply (ES 0 ) is equal to zero…

8. Japanese price where excess demand (ED0) is equal to zero… Page 371

9. Page 371 If the price in Japan is P j2 , excess demand would be ED 1 . If the price is the U.S. Is PUS2, excess supply Would be ES1

10. Thru trade, both country’s markets would be in equilibrium where ED=ES at price P E . Page 371

11. Page 371 If the price in Japan is P E , consumer surplus would increase by area a+b while producer surplus would fall by area a. If the price in the U.S. is P E , consumer surplus would decline by area 1+2 while producer surplus would increase by area 1+2+3

12. Page 373 Both countries register a net societal gain In economic welfare. The winners and Losers differ however…

15. Page377 Domestic demand Domestic supply Domestic market equilibrium under free market conditions shows a price of $4,000 and quantity of 50 tons. 50

16. Free trade supply Prevailing World price Quantity supplied Quantity demanded Excess Demand 60 = 80 – 20 Page 377

17. Prevailing world price plus tariff Quantity supplied Quantity demanded Excess Demand 20 = 60 – 40 Supply with tariff Page 377

18. Welfare Effects of Tariff Consumer surplus before the tariff on the previous slide was equal to area a+b+c+d+e+f+g . After the tariff, consumer surplus would fall to area e+f+g, or a loss of area a+b+c+d . Producer surplus increases from area h to area a+h after the tariff. The tariff revenue received by the government is equal to area c . Dead-weight loss to society is equal to area b+d . Page 377

19. Page 380 Autarkic price

20. Page 380 Free trade supply

21. Page 380 Combines both a tariff and a quota… Tariff rate for imports under quota Free trade supply

22. Page 380 Combines both a tariff and a quota… Tariff rate for imports under quota Tariff rate for imports over quota Free trade supply

23. Page 380 Combines both a tariff and a quota… Tariff rate for imports under quota Tariff rate for imports over quota Free trade supply Producer surplus increases by area e as price to $200

24. Welfare Effects of TRQ Consumer surplus would fall as a result of the TRQ by area e+f+d+a+c+b+g . Producer surplus increases by area e+d The revenue received by the government is equal to area a+b+c . Dead-weight loss to society is equal to area f+g . Page 380

28. Page 392 Impact of removal of small nation tariffs Means consumers gain A+B+C+D. The net gain to society is B+D.

29. Page 393 Diversion reduces global welfare. Consumers gain A+b+c+d, but the net gain to society is b+d-e.