Elimination of Tariff exercise

Arguments for and Against Free Trade in a Developing Country 

Background:  You live in a developing country in Latin America.  Your country currently has many policies that make it difficult for foreign companies to sell products there, including high tariffs.  A new economic proposal is being debated in your national legislature. This proposal, if it passes, would eliminate the 40% tariff on agricultural machinery.  This would probably lead to future policies that would reduce or eliminate other trade barriers, opening the doors to free trade in your country. 

Your job:  You are a reporter for the leading newspaper in the capital city of your country.  You are assigned to decide whether your paper should be for or against the 40% tariff.  You conducted six interviews with interested citizens and government officials about the proposal to eliminate the tariff.  You must now analyse the information from the interviews and form an opinion for your newspaper about this proposal. 

Directions: For each of the six interviews, make a check mark to indicate whether the person was in favour of the protective tariff or opposed to it.  Then summarize the reasons each offered to support his or her position. 

1.  Mr Juarez (Govt Official):__X __ Eliminate the tariff   _____ Keep the tariff

Why?  The tariff should be eliminated as we want for our markets to expand and people to have more choice. It will bring more competition and more development into the market and force the prices to go down.  We want more people to have possibilities on buying machinery to create new vacancies and do develop the agriculture.

2.  Mr and Mrs Baez (Own a bakery):_X_ Eliminate the tariff   _____ Keep the tariff

Why? Yes I think tariff should be eliminated, it would eventually do good for everyone. I own a bakery and buy a lot of base ingredients like flower, butter, milk etc. every month/week. And these are mostly made from agricultural products, therefore as we would eliminate the tariffs, agriculture could develop much more efficient and the prices of products would drop. Meaning I’d get my basic needs cheaper, would be able to sell cheaper and earn more profit!

3.  Mr Rodriguez (Farmer): _X__ Eliminate the tariff   _____ Keep the tariff

Why?  The tariff should be eliminated as it would let us farmers develop our lands better and efficient. With new technology we might even be able to grow things we weren’t able to before. We will also be able to grow crops more efficiently and be able to sell them cheaper; therefore more people would have the available funds for food.  I probably might even earn more profit.

4.  Ms Sanchez (Teacher): _____ Eliminate the tariff   __X__ Keep the tariff

Why? I think the tariffs should be kept, as we want our domestic producers to do well. As well as my sister’s husband works in machinery factory and I wouldn’t want him to lose his job because some foreign traders want to earn more profit here. As well as if we import more and produce less domestically it means out GDP will fall – life quality will fall.

5.  Mr Lopez: (Machinery Factory Worker)_____Eliminate the tariff  __X__ Keep the tariff Why?  Keep the tariff. If the tariff will be eliminated, then there will be loads of foreign supply being imported to the country that will be priced lower. That means less people will be buying our domestic produced machinery therefore prices would be lowered and less people will be needed for manufacturing. It would mean that I’d have to possibility to lose my job!

6.  Ms Miranda: (Economist) __X__ Eliminate the tariff   _____ Keep the tariff

Why?   The tariff should be eliminated as it would help our agricultural market to develop. The market would grow much bigger and have more variety as new technology brings more opportunities. When the machinery will be cheaper to buy, it means more people/farmers will be able to buy it which also means they will probably need more workers. Therefore products will be cheaper, all production of agricultural products will be more efficient, evolve more workers and expansion of the market.  Plus it gives way more work for me to analyse all the effects and write articles!

Prioritize your Opinions:  Should a Developing Country Have Free Trade? 

You have read and summarized six interviews about whether a developing country should eliminate a protective tariff and move toward free trade.  You may have found that there are important arguments on both sides of the question, and that sometimes the interviews provide conflicting information.  For example, people for and against the protective tariff believe that more jobs will be created for people in the developing country if their opinion is followed.  To complete your assignment for the newspaper, you must decide if you are for or against removing the tariff. 

Look through your notes for the people who were in favour of the proposal to eliminate the tariff.  List the five reasons that you think were most convincing to support this opinion.  After each reason, indicate how important you think that reason is by assigning one-to-five stars.  (One star means that you think the reason is of minor importance; five means that you think the reason is crucially important.)  Do the same for the people who were against the proposal to eliminate the tariff.  Then write your conclusion in the space provided. 

Five Important Reasons to Eliminate the Protective Tariff / how strongly I feel about this Reason

1. Ability to sell different goods cheaper, making them available to a wider range of people****      

2. Ability to earn more profit through paying less for production **     

3. Ability to produce agricultural products cheaper and more efficiently *****

4. It would encourage agricultural development and innovation for new machinery ****  

5. More production means more demand for workers***

Five important reasons not to eliminate the protective tariff

1. People working in the factories might lose their jobs**

2.Domestic production will decrease ***

3.Might cause decrease in GDP***

4.Free trade will make it harder for smaller companies to enter the competition or maybe even continue  in the business with foreign machinery**

5.Domestic producers want to keep the price on a high level to earn profit.*

Conclusion: MY NEWSPAPER SHOULD BE FOR THE PROPOSAL TO ELIMINATE THE PROTECTIVE TARIFF ON AGRICULTURAL MACHINERY.

The tariffs should definitely be eliminated, as for that also speak the reasons why we should/shouldn’t eliminate them.  The reasons that speak against the elimination of the tariff are just temporary problems that it will bring, like structural unemployment. Yet as the reasons speaking for the elimination of the tariff, they show long term changes for the better. As we eliminate the tariffs, we are on the way to open the market up for free trade. Without the tariff the prices of agricultural machinery would drop as the quantity is imported is usually made more efficiently and cheaper therefore they are able to sell cheaper. Lower prices for the machinery, mean that more farmers/companies will be able to buy them and increase their capital. Therefore they will be able to produce more, higher more people, yet sell their products at lower prices making them available for more people.