When NAFTA was being debated in the U.S. Congress, Representative Jerry Lewis of California said: “Bill Johnson owns the largest Caterpillar distributorship in the West. There is currently a 20% tariff on his products sold in Mexico. Caterpillar has a 50 percent share of the Mexican market. The other half is dominated by Komatsu Company of Japan. Bill says, 'Imagine what will happen when the 20 percent tariff comes off our tractors and it remains on the ones from Japan.' Under what circumstances will this effect of NAFTA be beneficial, and when will it be harmful, to (i) the U.S., (ii) Mexico, and (iii) Japan?
When NAFTA was being debated in the U.S. Congress, Representative Jerry Lewis of California said: “Bill Johnson owns the largest Caterpillar distributorship in the West. There is currently a 20% tariff on his products sold in Mexico. Caterpillar has a 50 percent share of the Mexican market. The other half is dominated by Komatsu Company of Japan. Bill says, 'Imagine what will happen when the 20 percent tariff comes off our tractors and it remains on the ones from Japan.' Under what circumstances will this effect of NAFTA be beneficial, and when will it be harmful, to (i) the U.S., (ii) Mexico, and (iii) Japan?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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When NAFTA was being debated in the U.S. Congress, Representative Jerry Lewis of California said: “Bill Johnson owns the largest Caterpillar distributorship in the West. There is currently a 20% tariff on his products sold in Mexico. Caterpillar has a 50 percent share of the Mexican market. The other half is dominated by Komatsu Company of Japan. Bill says, 'Imagine what will happen when the 20 percent tariff comes off our tractors and it remains on the ones from Japan.' Under what circumstances will this effect of NAFTA be beneficial, and when will it be harmful, to (i) the U.S., (ii) Mexico, and (iii) Japan?
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