Question

If the Korean steel industry subsidizes the steel that it sells the United States, the
a. United States should protect its domestic steel industry from this unfair competition.
b. harm done to U.S. steel producers from this unfair competition exceeds the gain to U.S. consumers of cheap Korean steel.
c. harm done to the U.S. steel producers is less than the benefit that accrues the U.S.
d. United states should subsidize the products it sells to Korea.

Answer 1

Answer

Option a) is correct. United States should protect its domestic steel industry from this unfair competition.

Reason:

If the Korean steel industry subsidizes the steel that it sells the United States, the Korean Government is trying to promote its exports and at the same time trying to increase production levels in its own country. Such practices can destroy the producers of other countries who cannot compete with these Korean exporters due to extremely low prices. Thus, United States should protect its domestic steel industry from this unfair competition.

Other Options are incorrect because we cannot say for sure if the gain to US consumers because of such a trade is more than the harm done to the Korean producers and vice versa. Thus, Options b) and c) are incorrect. Option d) is not at all justified because susidising the products that are exported to Korea is also like getting into an unfair trade practice. Thus, Option d) is also incorrect.