Chapter 9, Problem 7CDQ

Summary Introduction

Case summary:

The case study indicates the complications in importing the tomatoes from Country M. The impact of importing and trade on the both sides are explained in this case. NAFTA (North American free trade agreement) came into effects. The tariff on import of Country M was dropped. Country U growers thought that there will be a huge loses because of Country M’s counterpart.

So growers of Country U lobbied the government for a minimum floor price for the Country M’s tomatoes in order to make the price of Country M to fall. But this does not protect the growers of Country U.

Before the effects of NAFTA Country M produces 800 million but now this has been increased to 2.8 billion pounds in the year 2011.

This made Country U to get the protection of import to survive. They also forced commerce department to scrap the floor price agreement and to make a case that Country M was dumpling the tomatoes in Country U.

This made many players to get angered including the importers of vegetables and many others. Thus the commerce department established a new agreement with country M to increase the price floor to form different pricing schemes.

Characters in the case:

• Country N
• Country M

To discuss: The optimal government policy.

Introduction:

NAFTA (North American free trade agreement) is the agreement which is signed by the Country C, Country M, and Country U to have a free trade among the three countries.