Question

Do you think the reduction or elimination of tariffs and nontariff barriers between the U.S. and the EU as was proposed through the Trans-Atlantic Trade and Investment Partnership would have increased demand for U.S. goods and services in Europe and make European goods and services cheaper for Americans? In the face of a global recession is it wise for nations to begin raising tariffs and increasing subsidies to domestic producers? Why or why not?

Answer 1

I think the reduction or elimination of tariffs and nontariff barriers between the U.S. and the EU as planned through the Trans-Atlantic Trade and Investment Partnership would have made US goods and services more popular in Europe and EU goods and services mor popular in the USA. This is because zero tariff or reduced tariff would reduce the price of the goods and services. Also, the reduced barrier will increase cross-border trade between USA and EU, which will allow them to specialize in certain products according to comparative advantage. Specialization would increase economies of scale, efficiency and reduce costs of production, Reduces costs of production would also reduce the price of goods and services. So, the trade would benefit the consumers of both EU and the US.

I think to raise tariffs and increasing barriers is a wise step. These will reduce the volume of trade and countries will be deprived of the benefits of trade. Trade increases economic efficiency by ensuring optimal usages of resources through specialization. Trade reduces costs of production and helps in the maximizing utility of consumers across all countries. Therefore, increasing tariffs, trade barriers or subsidies would be counterproductive, increase the cost of production and reduce the competitiveness of a country.